Homeowner insurance
Talking about homeowner insurance, it is very important to know the type of insurance you need in case you have purchased a condo or co-op. In this case, the bank will require insurance to protect its investment in your home. You may, however, need greater insurance in order to cover your personal items, liability or fees that may be charged to you regarding shared areas of the building like the lobby.
As a matter of fact you will need two separate policies to protect your investment:
Your own insurance policy. This will give you the much-needed coverage for your personal possessions, structural improvements to your apartment and additional living expenses if you are the victim of fire, theft or other disaster listed in your policy. You also get liability protection.2. A "master policy" provided by the condo/co-op board. On the other hand, this covers the general areas you share with others in your building like the roof, basement, elevator, boiler and walkways for both liability and physical damage.
In order to properly insure your apartment, it is of utmost significance that you know which structural parts of your home are covered by the condo/co-op association and which are not. In theory, you can do this by reading your association’s bylaws and/or proprietary lease. If you have any relevant questions, talk immediately to your condo association, insurance professional or family attorney.
It is worth mentioning in this regard that sometimes the association is responsible for insuring the individual condo or co-op units, as they were originally built, including standard fixtures. The individual owner, in this scenario, is only responsible for alterations to the original structure of the apartment, like remodeling the kitchen or bathtub. More often than not this includes not only improvements you make, but those made by previous owners.
In other conditions, the condo/co-op association is responsible only for insuring the bare walls, floor and ceiling. That’s why the owner must insure kitchen cabinets, built-in appliances, plumbing, wiring, bathroom fixtures etc.
In addition, it is advisable that you ask your insurance professional about the below mentioned additional coverages:
Unit assessment This is particularly important as it reimburses you for your share of an assessment charged to all unit owners as a result of a covered loss. For example, in case if there is a fire in the lobby, all the unit owners are charged the cost of repairing the loss.2. Water back-up This insures your property for damage by the back-up of sewers or drains. Always keep one thing into consideration that water back-up may not always be included in a policy. It’s your responsibility to check to see that it is included.
3. Umbrella liability Theoretically speaking, this is an inexpensive way to get more liability protection and broader coverage than is included in a standard condo/co-op policy.
4. Flood or earthquake If you live in an area prone to disasters like flood and earthquake, you will certainly require to purchase separate flood and earthquake policies. It is worth noting that flood insurance is available through FEMA's National Flood Insurance Program. As a matter of fact both flood and earthquake insurance can be purchased through your insurance agent.
5. Floater or endorsement In addition, if you own expensive jewelry, furs or collectibles, you might opt for getting additional coverage since there is generally a $1,000 to $2,000 limit for theft of jewelry on a standard policy. That’s why, when purchasing insurance, it is important to find an agent or company that specializes in condominiums or co-ops. Also don’t forget to ask about all available discounts as it can reduce your rates by raising your deductibles and by installing a smoke and fire alarm system that rings at an outside service. Theoretically speaking, if you insure your unit with the same company that underwrites your building’s insurance policy, you might also get an additional reduction in premiums.
Standard homeowners policies do not cover flooding. You can purchase flood coverage directly through your homeowners insurance agent. However, the policy is provided by the Federal Flood Insurance Program.
Replacement cost coverage is available for the structure of your home, but only actual cash value coverage is available for your possessions. Replacement cost coverage pays to rebuild your home as it was before the damage. Actual cash value is replacement cost coverage minus depreciation so that the older your possessions are, the less you will get if they are damaged. There may also be limits on coverage for furniture and other belongings stored in your basement.
Flood insurance is available for renters as well as homeowners. You will need flood insurance if you live in a designated flood zone. But flooding can also occur in inland areas and away from major rivers. Consider buying a flood insurance policy if your house could be flooded by melting snow, an overflowing creek or pond or water running down a steep hill. Don’t wait for a flood season warning on the evening news to buy a policy—there is a 30-day waiting period before the coverage takes effect.
The federal flood insurance program provides only limited coverage. If you need more coverage than the federal program provides, additional coverage known as “excess” flood insurance is available from specialized insurance companies. Depending on the amount of coverage purchased, an excess flood insurance policy will cover damage above the limits of the federal program on the same basis as the federal program—replacement cost for the structure and actual cash value for the contents.
Excess flood insurance is available in all parts of the country—in high risk flood zones along the coast and close to major rivers as well as in areas of lower risk—wherever the federal program is available. It can be purchased from specialized companies such as Lexington Insurance Company, part of American International Insurance Company, and Lloyd’s through independent insurance agents, or from regular homeowner insurance companies that have arrangements with a specialized insurer to provide coverage to their policyholders.
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