Many condo master policies are now using a “per unit” deductible in order to shift risk from the master policy to the HO-6 or “unit owner’s” policy. Condo owners need to be advised of the type of HO-6 policy they should carry in order to properly minimize their out of pocket exposure.
The condo trust documents, or “condo docs” spell out what the association and unit owners are responsible for in the event of a loss. Under your agreement, the association is responsible for all common building elements and the entire unit, including any betterments or improvements made by owners.
Unit owners should always carry enough under their HO-6 Coverage A limit to cover the master policy’s highest deductible. This limits the association’s expense of paying the deductible for a loss involving one of the units and limits the unit owner’s out of pocket expenses.
Unit owners should check with their insurance agent to see that their policy has the “HO 17 34 – Unit Owner’s Modified Other Insurance & Service Agreement Condition” endorsement. Some companies use a base policy that includes this coverage automatically, but companies using newer forms can add this endorsement, to ensure there’s no issue with the HO-6 company paying the cost of the master policy deductible.
The unit owner should also carry the “HO 04 35 – Loss Assessment Coverage” endorsement. This endorsement (at limits typically up to $50,000) protects the unit owner from a loss that is assessed to all unit owners, like damage to a common area, by a peril that is covered by the HO-6 policy (like fire).
Finally, the unit owner should carry “HO 17 32 – Coverage A Special Form” endorsement. This endorsement broadens the types of perils that the HO-6 policy covers. Under “special form”, the HO-6 policy covers all perils except for those specifically excluded by the policy. Without this endorsement, the HO-6 covers only the perils listed on the policy.
For more information on Condo Insurance, or for questions regarding your Condo coverage, contact your McSweeney & Ricci Account Manager.