Owning a condominium in Hawaii can be a significant milestone for many individuals or families, so it is equally significant to protect this asset moving forward. As a homeowner, this starts by having a basic understanding of the two different insurance policies involved in protecting the condo unit – the Master Insurance Policy for the building provided by the Home Owners Association (HOA) and the HO6 Condo Policy secured by each condo unit owner for their individual unit.
Let’s start by looking at the structural protection for the condo unit from the outside-in. The Master Policy provided by the Association protects the overall building and all condo units within it. The cost for this policy is billed to each condo unit owner in the Association dues. This policy essentially covers the blank canvas of the home when it was originally constructed from the exterior framing to the interior formation of the home including the drywalls, flooring, and fixtures. Following a covered loss, (ie fire, water leak/burst) the condo unit owner will utilize this Master Policy to repair damages to the original structure of the home. As a part of this process the Master Policy has a deductible that can be assessed to the unit owner responsible for the damage and there are two key aspects of this Master Policy deductible that need to be considered:
#1- What is the amount of the Master Policy deductible for your Association? This amount ranges from $5,000 all the way up to $250,000 depending on your specific Association Insurance plan. Considering this potentially large amount that can be assessed in a loss, it is critical to know you have sufficient coverage from your individual HO6 Policy so you are not left paying any out of pocket expense for this.
#2- How will your HO6 Condo Policy cover this Master deductible amount? Now that you know your Master Policy deductible amount, the next step is to know how your HO6 Policy will cover that on your behalf. There is no uniformity as to how the various insurance carriers will respond to the Master Policy deductible from the HO6 Policy as some carriers will cover this amount from the Dwelling Coverage while others may cover it from Personal Liability or Loss Assessment. Once you determine which HO6 Policy coverage will apply, confirm that coverage limit is at least equal to or greater than your Master Policy deductible amount.
Beyond covering the Master Policy deductible, the HO6 policy also provides structural coverage for the condo unit by picking up where the Master Policy leaves off. While the Master policy covers the original construction of the home, the HO6 Policy will cover structural improvements or upgrades done to the flooring, countertops, and fixtures. An example would be if the condo was originally built with carpeting throughout and has since been renovated with wood laminate, the HO6 Policy can provide coverage to repair the upgraded wood laminate flooring following a covered loss. With this in mind, condo owners want to have a sufficient limit of Dwelling coverage on the HO6 Policy for the estimated value of improvements/renovations done to their home. This includes renovations done by a prior owner as the Master Policy will not cover anything beyond the unit’s original construction. This consideration is necessary to adequately insure the improved condition and increased value of the home in the event of a partial or total loss event.
If you have any questions regarding this or would like an analysis of your current Condo Insurance policy, please feel free to contact us at Atlas Insurance at infohawaii@atlasinsurance.com