Bare walls or walls in, do you know the difference and which you are?

Let’s face it. Reviewing your insurance does not rank high up on the list of pleasurable experiences. We get that. However, an insurance policy that does not cover you properly can be a considerable expense and sometimes a financial catastrophe.  Add in to this equation an Association having a large or minor affect on the decision process of what to buy and there can be some confusion.  Hopefully, this short list of considerations for condo unit owners, single family residence owners and landlords, will make the process easier.

Condo Unit Owners: 

It’s important to know where the responsibilities of the Association and the unit owner intersect. Some important terms and coverage categories to figure out are:

• Walls-In: This means that the Association covers the interior of your unit at least to some degree. Typically, items such as basic flooring, cabinetry, plumbing and electrical fixtures are included in the Association’s insurance protection.  In most cases, the key word in this sentence is “basic,” so make sure that you add coverage on your own unit owner’s policy to protect these upgraded items, such as hardwood floors, tile, custom cabinetry, etc.
• Bare Walls: This term means that the Association is covering the structure of your residence into the interior, but only up to and including the drywall. All the things that make your house a home such as: flooring, plumbing and electrical fixtures, cabinetry, etc, must be added to your individual policy.

However, the question of the moment is:  how do you know which way to cover? Ultimately, your CC&R’s will answer that question. However, you can also check out your Association annual disclosure, or call the Association’s insurance agent to see which type of coverage you need.

Personal Property:  Of course, since the Association does not own any of your furniture and personal belongings, you will need to cover those. Keep in mind that you will want replacement cost coverage so that you can replace your old with new.
Loss Assessment:  Should your Association need to assess you for an item that could be covered under your insurance; you will want to have loss assessment coverage. In this event, you would turn your assessment over to your insurance carrier for payment.

You should also have a conversation with your insurance agent about the proper liability limit and loss of use.
IMPORTANT: Make sure you have coverage for your Association’s deductible. These deductibles can range from $1,000 to $20,000 or even $50,000, so be prepared.

Single Family Residence Owners:

Because the Association does not insure any portion of your premises, this is a much more straight forward policy when compared to a Condominium. Your typical homeowners policy is going to cover your structure, personal belongings, liability, loss of use, etc.

One important coverage to add: Loss Assessment Coverage.  As described above, an assessment from your Association may be covered by your homeowners insurance, but you need to add this coverage as it’s not automatically covered. Talk to your insurance agent and get some options for this coverage. It may cost you a few extra dollars, but could be well worth the expense.

Landlords:

Especially in condo associations, this is an often overlooked policy. For each category of policy (condo or single-family residences), all of the information in the above sections apply, however for a landlord’s policy, you will want to be sure that you have two very important coverage items:

• Loss of Rents: Pays your loss of rental income should your tenant be forced out due to a covered claim such as fire, water damage, etc.
• Lessor’s Liability: These items pick up exposures such as wrongful entry, wrongful eviction, slander, etc.

Earthquake Coverage:

Most often, Earthquake Insurance is sold in conjunction with your condo or homeowners policy.  This can be a great coverage to have and the California Earthquake Authority has a very user-friendly website where you can review the coverage as well as the associated premiums. Check out www.EarthquakeAuthority.com or contact your agent.

Hopefully these tips give you a little more understanding of the important aspects of choosing the proper insurance plan. The most important at thing to do is to talk to an agent that is familiar with your needs as it relates to you living in your particular Association. A little pre-planning can go a long way to avoid a significant financial loss.

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