Condominium Insurance and the Value of a Customized Unit Owners Policy

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Ins Zone CapersBy Joe Capers, Insurance Zone

On June 24, 2021, Champlain Towers South in Surfside, Florida, suffered a collapse of the east wing, killing 98 people. This building was constructed in 1981 with 136 units. Although building failures of this nature in the U.S. are seldom seen, it is important to examine what happened to prevent similar collapses in the future.

The investigators are likely to uncover defects in the original design and construction. Settlement of the site may also be a contributing factor, as may have been the construction of an adjacent development. None of these were under the control of the board. However, there is also clear evidence from the site that some factors within the board’s control are likely culprits. The structural deterioration was readily visible in some areas, even to a lay-person and this failure could have been delayed.

The current condo laws in Florida places fiduciary responsibilities on Unit Owners and Board Members. It is very important to understand the requirements and design your policy to maximize your condo insurance program protection whether used as your primary, secondary residence or rental. And make sure your packages include Hurricane/Wind coverages and flood insurance as well.

Because the association is responsible for maintaining and insuring the exterior of the building (shell), Condo Unit Owners need coverage for the replacement cost of Structural Elements Within – from the paint in, including flooring, fixtures, cabinets, built-in appliances, and more. This coverage amount is arrived at by calculating the cost per square foot to rebuild multiplied by the square footage of the unit. Sometimes the developer will provide this number and typically the range starts at $60 per square foot, and depending on the quality of construction, that can go up significantly. Your condo policy should always include Special Coverage A. This is broader coverage, changing the policy from a named peril to an open peril policy.

Another important coverage to consider is Personal Property coverage which is replacement cost on furniture, accessories, clothing, appliances, electronics, and other valuables, basically anything that’s not attached. Replacement cost insurance is defined as the cost to replace and/or repair the building with materials of like kind and quality following a loss. If policyholders have replacement cost insurance, they may receive advance payments for the depreciated value for furniture, televisions, clothing and other household items.

Loss of Use/Loss of Rents is an important feature as well. Depending on the carrier, they may offer loss of use but not loss of rent. If your unit is damaged and you can’t use it for a period of time, you may be able to collect under loss of use if it’s your primary or secondary residence. If you’re losing out on rental income, check your policy to see if you have the Loss of Rents coverage. You should always make sure you have the correct policy for the right risk.

Loss Assessment is another important coverage on condo policies that Florida law requires. Its purpose is to pay up to your loss assessment coverage amount (typically $2,000) for an assessment levied by the association for covered losses to the common elements. An example of this coverage coming into play was when Hurricane Michael knocked down most of the fencing and damaged the roofs of an administration building and conference center that was covered under the master policy. Because these perils were covered under the association’s policy, they had the option to assess each condo owner to help re-coup their out-of-pocket expense.

Flood coverage, which is typically a separate policy, is also important. The unit owner should carry flood insurance even if their unit is not on the ground floor. Some condo associations purchase a master program through the National Flood Insurance Program called the RCBAP (residential condominium building association policy). This policy does cover many of the interior build-out items for a unit owner, but it does not cover the personal property. So, does the unit owner still need their own condo flood policy? David Thompson, with the FAIA (Florida Association of Insurance Agents) says this: “If there is no RCBAP in place the unit owner needs his own primary flood coverage. If the RCBAP has a large deductible and the unit owner sustained building damage, then their [flood] policy will respond. Should the unit owner be assessed by the association for a flood loss, the unit owner’s policy will cover the loss assessment up to their building limit with no deductible. This alone is a compelling reason for all condo unit owners to have their own building flood coverage.”

Liability and Mold and Water Backup, which are also important coverages on condo policies should be properly structured. And if you rent your unit, always consider excess of higher limits of liability protection. The bottom line is this – when it comes to condo insurance policies the average consumer isn’t aware of their exposures and responsibilities. You should always talk to an experienced insurance agent so you can make the best coverage decisions for your situation.

Insurance Zone, founded by Joe and Lea Capers, is a full service commercial and personal lines insurance agency serving Destin, Miramar Beach, Santa Rosa Beach (30A) and Inlet Beach. Visit their Video Library on and watch our informative video on ’Condo Insurance Made Easy’, or call 850.424.6979 and talk with one of our experienced agents.

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