HOA’s can be a great investment. Although they require upkeep and tenant maintenance now more than ever they can provide an affordable place to live where expenses are shared. Some people have owned their units for years and understand the market, while others are new and learning the ropes.
There are many key factors that play into the overall affordability of your homeowners association, however there is one major way to protect yourself. Most people see HOA building insurance as something that they have to carry, however there is more to it than that. Implementing the proper HOA building insurance policy can protect you and your property against damage to the property, along with liability claims.
Is a standard policy coverage included in most HOA building insurance policies that protect against liability claims for bodily injury and property damage arising out of the premises. Common claims made against HOA’s are for slip & falls or other injuries at the premises. HOA buildings with swimming pools and play structures add another element of general liability exposure as accidents often happen at these locations. Basic limits are $1,000,000 per occurrence and $2,000,000 aggregate, and can be increased with excess or umbrella insurance policies upon your request.
This covers the structures as listed on the declarations of the insurance policy. The insurable value of the building is based on the cost to rebuild the structure as determined by several factors including; existing appraisals, automated rebuild cost estimator software, and client request. The building coverage of your apartment building insurance policy will generally account for the largest portion of your premium.
Building Ordinance Coverage is one of the most overlooked policy coverage options on HOA building insurance policies, but it is very important for you to understand and consider. Most standard insurance policies will afford coverage for the indemnification of the covered apartment building to the condition prior to the loss. What is not covered is the increased cost to remodel, repair, or rebuild due to changes in federal, state, and local building codes. Building ordinance coverage was created to fill this void in standard apartment building insurance policies.
- Coverage A: Coverage for loss to the undamaged portion of the building
- Coverage B: Coverage for the cost of demolition
- Coverage C: Coverage for the increased costs of construction
Business Income Coverage for HOA buildings is protection against loss of dues as a result of a loss or damage due to a covered peril. The coverage will be for the time while the building is being repaired subject to time limits or dollar expense as listed in your policy. It is important to keep accurate accounting of your expenses as well as rental receipts as this information may be requested when determining claims payments.
- Deductible: The deductible is the portion of the loss that you agree to retain. The higher deductible that you choose to carry on your HOA building insurance policy the larger discount you will receive. Deductibles range from $1,000 to $100,000, and sometimes higher if you own a large apartment building. You get to choose your deductible, and your agent can help you along the way by presenting alternate options upon your request.
- Sprinkler System: Wet, dry, or chemical systems all apply for sizable discounts.
- Central Fire/ Alarm: Fire alarms that report to a central station or monitoring service are eligible. A certificate of service will generally suffice for adding this coverage.
- On-Site Property Manager: Several carriers offer a discount for having a property manager that lives on-site. The most notable of these carriers is Mercury.