by Ed Sneineh

Condo owners and homeowners share one thing in common: The common areas of their property such as building structures, common utilities, common service or entertainment area, common hallways and driveways, etc. These commonly owned properties are exposed to property and casualty losses for which insurance is very essential for protection. For that and other reasons, condo and homeowners associations are established to provide services in connection with these common areas. Among these services are  risk management and insurance services.

While each unit owner is responsible for the property and liability losses that may occur inside their units, condominium and homeowners associations are responsible for servicing the common areas and for purchasing insurance policies for the benefits of all members. For that reason, condo associations get one master policy and list each unit owner as a loss payee and additional insured on the master policy, each with the same proportion of their ownership compared to the total. Unit owner pays monthly assessment fees which cover administrative and operative expenses of the association including premium payments for the master insurance policy. Depending on the size of the association, a professional management company may be hired to run the association's activities or some elected members of the association board of directors may handle these daily tasks.

Factors Affecting Premium Rates For Condo Associations

The prominent factor that affect the price of property and liability insurance rates is the description of the buildings associated with the association in terms of number of units and the square footage of the associated buildings. Square footage of the buildings will determine the replacement cost of these buildings. Also, newer buildings with higher security systems (sprinkler systems, central station fire alarms etc.) mean lower chances of losses. Fire resistive construction materials and history of  plumbing/ heating/ electrical updates are critically important in determining the insurance rates for the association master policy.

Scope of services maintained and managed by the association: Associations that own, manage or maintain businesses such as convenience store, sporting and entertainment facilities and activities such as swimming pools, gymnastic facilities, amusement places and parks, etc. are more prone to lawsuit than smaller condo associations that do not have similar scope. If these services/ facilities are offered insurers will want to know more details about the security offered to protect members and visitors from injuries and harm. In larger associations, more risky activities may be offered, such as boat rentals, ice skating, baseball parks, basketball courts, and diving. These activities and facilities can reach higher risk levels when associations get involved in providing airport facilities, horse trail, bike trail, and stables that may be managed or  maintained by the association, and for which the association will be responsible.

Other Coverages That May Be Needed By Condo Associations

Workers compensation is a coverage that is needed if the association hires people to run the affairs of the association. Depending on the size and scope of the activities assumed  by the association workers comp coverage can be very simple clerical exposure to much higher risks such as maintenance people or drivers.

Auto liability is also needed in the event that the association owns their own commercial autos such as service/ maintenance vehicles, snow plowing trucks, etc.

Umbrella coverage is important for all association, especially for medium to larger size condo association where losses resulted from lawsuits against condo association can be sizable. Umbrella will simultaneously raise the liability limits on all underlining general liability, auto liability, workers compensation to a much higher limits (ie $2 or even $5 million, each occurrence).
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