3 Essential Coverages Condo Associations Need to Know

As a condo association, your primary responsibility is to protect the interests of the unit owners and maintain the common areas of the property. One of the most important steps you can take in fulfilling this duty is to obtain comprehensive insurance coverage. Here's a detailed guide to the three essential coverages that every condo association should have:

1. Property Insurance

What it covers:

Property insurance protects the physical structure of the condo building, including the interior and exterior elements like walls, roofs, floors, windows, and common areas. It also provides coverage for fixtures and appliances that are part of the building.

Why it's essential:

A fire, hurricane, or other disaster could cause extensive damage to your condo building, leaving the association financially liable for repairs. Property insurance helps to mitigate these risks and ensure that the association can restore the property to its pre-loss condition.

Average cost:

According to the Insurance Information Institute, the average annual premium for condo association property insurance is $2,400.

2. Liability Insurance

What it covers:

Liability insurance protects the condo association and its officers, directors, and volunteers from claims of bodily injury or property damage caused by the association's operations or negligence. This includes accidents that occur on common areas or during association-sponsored events.

Why it's essential:

Accidents can happen anytime, anywhere, and even the most cautious condo association can face a lawsuit. Liability insurance provides a safety net to cover medical expenses, legal fees, and other damages that the association may be held responsible for.

Average cost:

The average annual premium for condo association liability insurance is $1,500, according to the Community Associations Institute.

3. Fidelity Bond Coverage

What it covers:

Fidelity bond coverage protects the condo association from losses caused by employee or volunteer theft, fraud, or dishonesty. This includes embezzlement, forgery, and misuse of funds.

Why it's essential:

People make mistakes, and sometimes those mistakes can have financial consequences. Fidelity bond coverage provides peace of mind, ensuring that the association is protected from financial setbacks caused by employee misconduct.

Average cost:

The cost of fidelity bond coverage varies depending on the size and complexity of the condo association, but it typically ranges from $1,000 to $2,000 per year.

Additional Considerations

In addition to the three essential coverages listed above, condo associations should also consider the following additional coverages:

• Directors and Officers (D&O) Insurance: Protects the association's board members and officers from personal liability for actions taken in their official capacities.
• Loss Assessment Coverage: Provides coverage for individual unit owners who may be financially responsible for the association's liabilities, such as a major repair or lawsuit.
• Flood Insurance: If the condo building is located in a flood-prone area, the association may need to purchase separate flood insurance to cover damage caused by rising water.

Conclusion

Condo association insurance coverage is an essential tool for protecting the property, people, and finances of the association. By obtaining comprehensive coverage, condo associations can minimize their risks, safeguard their assets, and fulfill their duty to the unit owners. It is important to work with an experienced insurance agent who specializes in condo association insurance to ensure that the association has the right coverage for its specific needs.