(First in a series of three articles from the Ad Hoc Insurance Committee)
Disclaimer: These articles are provided to assist you in understanding some of the complexities in condo insurance policies. You have the ultimate responsibility in understanding your personal insurance needs and the Association’s requirements as spelled out in the CC&Rs. The Association’s Master Property Insurance policies are listed in the annual Association Disclosure statement and online on the Members Portal. Please use these materials in consultation with your professional insurance agent/broker.
Introduction
Home ownership in an HOA condo is a little more complicated than when you owned your own house outside of The Villages. There’s a portion of your condo that is the responsibility of The Villages Association (which is protected by the Master Property Insurance Policy paid for by the Association) and a portion of your condo plus all your personal property that you are responsible for (which is protected by your personal HO6 Condo Insurance policy).
Basically, the structure of your condo—the foundations, the walls, the roof, and the floors, as they were originally built or have been improved by the Association—is insured by the Master Policy. In a disaster, the Association’s Master Policy will be applied to those elements in an attempt to replace them as is, but coverage is only assured to replace them with the same or similar build quality as when the condo was originally built. Generally, the original elements were known as “builder’s grade” (i.e., Formica countertops, linoleum flooring, standard doors and windows).
Over the years, many condo owners have substantially improved their homes with new cabinets, flooring, appliances, countertops, and much more. The owner-installed improvements are called “betterments and improvements” and are generally the owner’s responsibility to make sure they are fully insured. Many condos have had multiple owners since they were originally built, so a new buyer may have a hard time knowing what the original build looked like and what items have been upgraded.
The Association’s CC&Rs specify that the Master Policy will actually cover some owner’s improvements—those that are permanently attached to the walls, such as upgraded kitchen cabinets, countertops, and built-in appliances. This is called a “walls-in” insurance policy. Some of the benefits of a “walls in” approach is that it simplifies for the condo owner what they need to insure on their own policy. This led to a common explanation that if you turned your condo upside down and shook it, only those things that fell out would need to be covered on your personal policy. That explanation is simple and easy to visualize. Unfortunately, the world has gotten more complex and more expensive. Due to massive increases in insurance costs, the Association has had to limit the coverage it provides for owners’ improvements. For most condo owners (excluding Del Lago, Sonata, or Fairways), that coverage is capped at $50,000. So if you (or previous owners) have upgraded your condo with better cabinets, built-in appliances, marble/granite counters, expensive tile or wood floors, and so on, your improvements very likely exceed $50,000 in replacement costs and your HO6 policy “Dwelling” coverage needs to cover the difference.
For condo owners in Del Lago, Sonata, and Fairway Villages there is no cap on improvements.
In this article and the next, we will look at what each portion of your HO6 policy covers, and what decisions you and your insurance agent should be considering at policy purchase and at each renewal.
Your personal HO6 Policy
Every condo owner is required to have an HO6 policy and provide proof of coverage each year.
What the Villages Association requires to be in your policy:
- Loss Assessment (to help you pay any “Special Assessment” from The Villages due to the Master Policy being inadequate to cover the Association’s losses in a major disaster)—$50,000 coverage
- Personal Liability—minimum $300,000
- Personal Property coverage (the amount to be determined solely by you, the owner)
Other items you should carefully consider and get professional advice on:
- Dwelling insurance coverage to cover the replacement costs of betterments and Improvements that you, and/or previous owners, have made to your condo since it was originally built. The Association’s Master Property policy will only return the Association’s property to the original build quality of the unit.
- If you are responsible for the loss event, you will be responsible for up to the entire $50,000 Association insurance deductible. Consider having your HO6 policy cover this expense (most likely covered under Dwelling coverage, but some insurance companies may cover this under Loss Assessment instead). You also will be responsible for damages to your neighbors’ units—consider that in your HO6 Personal Liability insurance purchase.
- Loss of Use (when you can’t live in your condo until it has been repaired)
- Increasing the amount of Personal Liability beyond the minimum required by the Association
- Other add-on coverages like for high-value items (i.e., jewelry, artwork, antiques, etc.)
- Additional insurance policies for things like golf carts, which are not included in your HO6 policy.
There are also many discounts offered by different insurance companies so look for those discounts to help reduce your policy costs. Some examples: Gated Community/On-site Security, Firewise Certification. Protective Device (i.e., smoke/Carbon monoxide alarms), Mature Policy owner, and Multi-Policy (with the same insurance company).
In the next articles in this series of three, we will examine the details of what you need in your personal HO6 Insurance Policy. Future articles will discuss how the Association is addressing the current Insurance Crisis.
