Insurance Guide

Condo Association Insurance and the Honeycomb Difference

Honeycomb staff
Oct 10, 2021

If you need insurance for your condo association, look no further. Honeycomb provides condo association insurance that meets the needs of your COA – without the hassle or high costs associated with many insurance policies. We offer competitive rates, excellent customer care, and simple policy management. 

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What is condo association insurance?

Before defining COA insurance, it’s important to clarify what COA insurance is not: condo association insurance is not condo insurance. Condo insurance is designed to protect individual condo owners and provides coverage for the individual owner’s property and liability exposures. Condo association insurance, on the other hand, provides coverage for the association. 

  • Condo association insurance does not cover properties that individual property owners rent out or own. 
  • Condo association insurance does provide coverage for shared property that the association owns, such as playgrounds or swimming pools. It also provides some liability coverage. 

Because associations have unique coverage needs, it’s important to work with a COA insurance partner that understands COA coverage, and builds in all the coverage elements you need, while eliminating features you will never use that inflate policy costs. Since Honeycomb specializes in condo association insurance, you know you’re in good hands. 

Who needs COA insurance?

Condo associations need condo association insurance. State law may require COAs to maintain insurance coverage. Additionally, the covenants, conditions, and restrictions in most COAs stipulate insurance requirements. These requirements are smart because COAs have many exposures. Without proper insurance coverage, expensive claims could cause a COA to go bankrupt, leaving its members in the lurch. 

The COA generally purchases condo association insurance using its own funds. These funds may come from dues that members of the COA pay. However, individual owners do not need to purchase condo association insurance. Instead, they should buy condo insurance for their own properties.

You may see COA coverage described as the COA master insurance policy to differentiate it from individual condo insurance coverage.

What does condo association insurance cover?

Your condo association insurance can include several critical safeguards:

  • Liability insurance: For a condo association, liability coverage is essential. This coverage protects the COA against certain types of liability associated with the shared spaces; for example, if someone is injured at a pool owned and maintained by the COA. 
  • Property coverage: Condo associations often own and control some shared spaces, such as pools, playgrounds, and clubhouses. COA insurance provides coverage for these shared spaces if a covered peril causes the damage, such as a fire, wind or hail damage, and certain types of water damage.
  • Dwelling: Dwelling insurance applies specifically to structures. For example, if your COA has a clubhouse that is damaged in a fire, dwelling insurance can help cover the cost of repairs to the building.
  • Business income: Your COA depends on a steady revenue to keep it operating, but revenue may be disrupted after a disaster. Business income insurance provides coverage for lost income after a covered peril.
  • Certified terrorism: Standard commercial insurance policies typically exclude coverage for losses caused by terrorism. However, certified terrorism coverage is available. 

What condo association insurance does not cover

Condo association insurance provides important coverage, but it doesn’t cover everything. The following losses are typically excluded:

  • Property owned by individual owners: COA insurance covers property owned by the COA. Individual owners need to purchase their own insurance coverage for their homes and personal belongings.
  • Property you share: If you share a space with a tenant, COA insurance will not cover this space. 
  • Home appliances: COA insurance does not cover home appliances. Owners can secure equipment breakdown insurance for their appliances.
  • Damages from certain perils: Some perils are typically excluded from property insurance policies – this includes from COA insurance policies. For example, standard property insurance does not cover earthquake and flood, but you can secure coverage through separate policies. Policies may also exclude acts of war and terrorism, although certified terrorism insurance is available. Damage caused by wear and tear or a lack of maintenance will not be covered, as property owners are expected to maintain their property. In addition, intentional acts committed by the insured will not be covered. Lastly, a standard policy does not cover mechanical breakdown, but equipment breakdown insurance is available. See your policy for details. 

Coinsurance for COAs

Coinsurance refers to the practice of splitting responsibility for claims between the insurer and the policyholder. When policyholders have some savings set aside for losses, they may intentionally use a coinsurance strategy to reduce the cost of insurance. However, policyholders sometimes inadvertently enter into coinsurance arrangements by underinsuring their properties.

Many property insurance policies include a coinsurance clause. This clause typically states that a property needs to be insured for a certain percentage of the property’s value, often 80% or 90%. If the policyholder does not maintain sufficient coverage, all claims payouts will be reduced using a formula that accounts for the difference between the insurance requirement and the actual level of insurance held.

To receive the full amount of loss (minus the deductible) from your COA claims, make sure your property insurance limits are high enough to cover the value of your property and satisfy your coinsurance clause.

How much does condo association insurance cost?

The cost of condo association insurance depends on multiple variables:

  1. The size of the association: A larger association is likely to face more risks and therefore have higher insurance costs.
  2. The value of the COA property: Since your property limits should cover the value of your property, properties with a higher value will be more expensive to insure.
  3. The location: Risks vary based on the location, so your property’s address is a cost factor. 
  4. The association’s loss history: A history of frequent or severe losses can result in higher rates. 
  5. The association’s risks: Good risk management practices can help you avoid claims and rate hikes.
  6. The liability coverage limits: Securing higher limits means you’ll have more protection, but this also increases costs.
  7. The deductible: If there’s a claim, the COA will have to cover the deductible. Opting for a higher deductible can help you save on premiums, but it also means you’ll need to have available funds to cover the deductible.
  8. The types of coverages included: You may want to add extra coverages to your policy. This will give you additional protection, but it will also increase costs.

The best way to find out how much you’ll pay for condo insurance coverage is to request a quote. With Honeycomb, you can receive a quote online in just minutes and save up to 40%.

COA insurance requirements 

When determining your COA insurance requirements, there are a few things to consider:

  • The insurance requirements in your state, county or city: Your COA may be legally required to maintain certain insurance limits.
  • The insurance requirements in your COA covenants, conditions, and restrictions: Your COA likely has requirements for insurance: the board members need to maintain this coverage.
  • The funds you have available for claims: You should make sure you have the funds necessary to cover your deductible. 
  • The cost to replace your property: If you suffer a total loss, you’ll want to have enough coverage to replace your property. Even in the case of a partial loss, the coinsurance clause can mean it’s important to have adequate coverage. As construction costs and property values increase, you may need to increase your insurance limits. 
  • Your risks and unique exposures: Some COAs have risks that others don’t. For example, depending on your location, you may have substantial flood risks. Since a standard policy doesn’t cover flooding, you will need to purchase a separate policy to secure coverage.

Additional coverages to consider

In addition to the standard COA insurance package, you may want to add some extra coverages. Common coverages for COAs include:

Ordinance or law: Ordinance or law coverage provides protection for additional costs associated with meeting building codes. It also provides coverage when damage to one section of a structure requires repairs to the entire area. This can be a useful coverage for certain COAs, especially COAs with older structures.

Directors and officers insurance: COA board members can be personally liable for the actions they take in the course of running the COA. Directors and officers insurance provides important protection for the COA board members.

Workers’ compensation: If your COA has employees, you are probably required to carry workers’ compensation insurance under state law.

Employment practices liability: This type of insurance provides protection against certain claims made by employees, such as wrongful termination and discrimination.

Employee benefits liability: If your COA has employees and you provide benefits, employee benefits liability insurance will provide you with protection for any errors or omissions you make when managing benefits. 

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