Steven Wayne
Windermere
Condo Owners Need Insurance, too
Posted on April 22, 2009
Bits Reader:
Never let ANYONE tell you that you don't need to buy homeowners insurance when you get a condo.
Yes, every condo association has a master policy in case the building burns down, but that policy probably doesn't cover the interiors (cabinets, paint,carpet, appliances, etc) of your unit.
The story below was a FIRST PERSON email I got from a friend in Alaska. Many thanks to Jill for sharing this sad story. It might save others Big Bucks!!
This is the situation my parents found themselves in a few years ago after buying a condo.
Shortly after they signed the mortgage paperwork (the title agent told them they did not need to buy separate homewoners insurance for the condo given the homeowners association had a policy) and before they even had a chance to move in, the other half of the building burned down when an apprentice plumber's torch sparked a massive fire. The plumber was under-insured.
I believe only $1MM or so came from that policy but the big shock came when homeowners realized the condo association Board and insurance broker had underinsured the buildings by about $7MM. Owners feel terrible about suiing the Board because in some cases, Board members were elderly, retired people still living there. At the end of the day however, someone on a Board needs to have a strong understanding of insurance to ensure that the group they make decisions for, is really getting the right coverage.
Shortly after they signed the mortgage paperwork (the title agent told them they did not need to buy separate homewoners insurance for the condo given the homeowners association had a policy) and before they even had a chance to move in, the other half of the building burned down when an apprentice plumber's torch sparked a massive fire. The plumber was under-insured.
I believe only $1MM or so came from that policy but the big shock came when homeowners realized the condo association Board and insurance broker had underinsured the buildings by about $7MM. Owners feel terrible about suiing the Board because in some cases, Board members were elderly, retired people still living there. At the end of the day however, someone on a Board needs to have a strong understanding of insurance to ensure that the group they make decisions for, is really getting the right coverage.
Shockingly, it is looking certain after years of wrangling, that the gap in coverage will fall to all the condo owners (both those whose condos burnt down and those whose condos did not). It will be split between them proportionately based on the size of their units. Most of the owners are elderly, retired and on small fixed incomes and have no assets or abilities to obtain new loans to fund this additional massive debt. My parents' share in this shortfall as of the last condo Board meeting a few days ago, will be $91,000 (updated from the 80k cited in the article).
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