Differences Between Condo Owners and Condo Association Insurance Policies?

Understanding the difference between a condo owner’s policy and a condo association’s policy can save you lots of money. This is because some condo owners pay for coverage they don’t actually need.

Unfortunately, while these two policies are equally important, few condo owners know the differences between them. For this reason, we’ll discuss everything you need to know about these two types of insurance policies, including the differences between them, their importance, practical examples, and so much more!

But to understand these two insurance policies even better, let’s first define them.

What’s a Condo Owner’s Insurance Policy?

A condo owner’s policy is an insurance policy that insures condo owners against accidents or damages inside their units. This policy can cover personal belongings such as clothing, furniture, fixture, electronics, appliances, ceilings, walls, etc., or any other qualifying item inside the unit.

What’s a Condo Associations’ Insurance Policy?

On the other hand, a condo association’s insurance policy covers items found outside the condo. Examples include hallways, elevators, swimming pools, community spaces, etc. Check the condo association’s by-laws to be certain of your insurance coverage needs.

Key Differences Between a Condo Owner’s Policy and a Condo Association’s Policy

The main differences between these two policies include:

The scope of coverage. This refers to the specific items covered by that particular policy.
Party being covered. A condo owners’ insurance policy usually covers the individual condo owner and household members, while a condo owners association insurance is more business-oriented (commercial).

Common Condo Owners Insurance Policies

A condo owner’s policy usually covers the following:

Building property. Also known as Improvements and Betterments, this policy covers the basic structure of your condo. It may include add-ons, installations, etc. It also extends to items such as flooring, cabinetry, countertops, etc.
Loss of use. A condo owner’s insurance could also cover your living expenses following specific damage inside your condo. So, for example, if you can’t stay in your condo due to damage caused by water, fire, or anything in between, as described by the insurance provider, the policy should take care of your hotel bills. This policy may also cover your meals, laundry, and other day-to-day expenses incurred due to the damage to your condo. However, remember that insurance policies vary, and you shouldn’t assume that you’re covered for such expenses without going through your insurance provider’s policies. It’s also important to note that such policies are very specific in what they cover. In most cases, a loss of use policy will only cover living conditions similar to the condo you live in.
Absentee ownership insurance. This policy is usually designed for condo owners who don’t actually live in their units. Some purchase such units as vacation or retirement property. If you find yourself in need of such a policy, contact the Insurance Center of North Jersey for a review.
Loss assessment. Covers you in situations where you are responsible for part of the damage or loss in a common area. This policy is usually triggered if the master policy can’t fully cover the claim. For example, it may help pay for medical expenses, liability costs, property damage, and so on.
Personal property. Covers your personal property, i.e., property located inside your condo. This may include clothing, furniture, appliances, etc.
Personal liability. Protects you against claims of property damage or bodily injury for which you or members of your household are legally responsible.

However, a condo owner’s policy may not cover earthquakes, floods, intentional injuries to others, nuclear hazards, damage from rodents, birds, insects, wear and tear, or damage from underground water such as sewer backups. Ask your agent what additional coverages are offered to you

Common Condo Association Insurance Policies

A condo association policy usually covers the following:

General liability. Condo association insurance offers liability protection the same way a condo owner’s insurance policy would. However, the association’s insurance will only cover costs relating to a third party being injured in a common area maintained by the association. So, for example, if a visitor trips and falls in the courtyard of the condo and decides to sue, the association will be liable for the legal and medical costs. The same applies if an individual gets injured while using an external facility, such as the condo’s recreational center, laundry room, elevator, etc.
Building ordinance and law insurance. This policy covers increased repair costs due to the enforcement of municipal laws or ordinances regulating the repair or construction of damaged buildings caused by an insured loss.
Directors and Officers insurance. Some directors and officers of the condo association may seek liability insurance to cover them against lawsuits deriving from their roles. These individuals usually volunteer to head the condo association, making important decisions in the process, and may face lawsuits. This policy, therefore, covers them from being held responsible for decisions made while executing their duties and responsibilities as board members.
Business personal property insurance. This policy is designed for condos with offices, furnishing, artworks, computers, tools, inventory, etc.

Commercial umbrella insurance. This coverage adds an extra layer of protection by including costs that exceed your other liability coverage limits. For example, suppose you’re required to pay an individual $500,000 as settlement for an injury that occurred in a common area of the condominium, but you only have half the amount. In that case, this policy should cover the other half. However, the specific amount depends on the policy’s coverage limits.
Demolition coverage: You’ll need this coverage to cover the costs of demolishing and clearing debris from a loss that’s covered by the insurance policy.

Additional Coverage Options for Condo Association Insurance Policies

The following policies are usually not so common but are equally important when looking for condo association insurance.

Workers’ compensation insurance. Condo association policies may also include workers’ compensation insurance to protect employees working on the premises from expenses incurred due to work-related injuries or illnesses.
Flood insurance. This type of condo association insurance policy provides coverage against damage caused by floods. There’s a common misconception that flood insurance is only necessary for units located near a large water body. In fact, so many flooding incidents have been reported in areas that aren’t considered high-risk for flooding. Another thing about flooding is that it just takes a few inches of water to cause damage worth millions of dollars.
Sewer and drain backup. Damages caused by sewer and drain backup are often impossible to fix. Things get even worse when followed by a lawsuit. However, having a condo association’s insurance keeps you covered against such a scenario.

The Bottom Line

As a condo owner OR a condo complex association, it may feel overwhelming to choose the right insurance for you. However, once you understand the difference between a condo owner’s policy and a condo association’s policy, it becomes easier to make the right choices.

Discussing such policies with your insurance provider can also make a huge difference.

Your insurance provider should offer sufficient documentation to help you understand what’s covered and what’s not. This also gives you a rough idea of what to expect when certain incidents occur, yet you aren’t sure whether your policy covers them.

Given that different condo owners have different needs, some insurance companies also provide the option to customize the coverage.