Multi-Family Residences, HOA’s and Homeowners Insurance Needs
By: Terri Davy, Capstone Brokerage Private Client Advisor, April 15, 2015
Multi Family Residences are an affordable alternative to single family homes. In Las Vegas several new multi family units seem to have popped up over the years. There are several types such as condos, duplex’s, mid-rise, high rise, apartment style, and perhaps the most common in Las Vegas, the town home. One thing that makes multi-family properties unique is that they share something structurally in common with other owners. They are also typically managed by a Homeowners Association (HOA) or property management company.
Multi-family residences are unique in regards to insurance needs as well. From an insurance point of view individual unit owners have a collective responsibility for insuring areas of the complex owned in common such as; building exteriors, stairwells, hallways, the pool area, etc. This is usually a policy that is paid for by the association’s monthly assessments. A portion of the dues is used to insure common areas. The Associations should explain which parts of the complex are insured by the common policy. These are typically two types of Master Policies:
Bare Walls-in Coverage: Only covers exterior, DOES NOT cover anything contained within individuals walls. Such as fixtures, cabinetry, flooring etc.
All In Coverage: This type of policy DOES cover interior fixtures such as wiring, plumbing, appliances, carpets, cabinetry.
Multi Family Residences typically have one of these two common insurance policies. Owners should be aware that the “Association Insurance Policy” does not cover the insured or the personal property in either case. In addition they need to have coverage for their belongings and personal liability. The association insurance policy more then likely will only cover the building and any commonly owned property as well as liability for the association. Also, in most cases, the association insurance does not cover a break in, or injury while inside your property. Keep in mind, when an owner is closing on their property that they think they have insurance through the association, when in reality that is only the common policy which is not what a bank would require in most cases.
Another important part of the community’s insurance policy would be loss assessment coverage. This is protection dwelling owners can use on claims involving the building or its common areas. In most condo communities, the HOA would carry this coverage for incidents outside of ones own personal property. However, it is important to keep in mind that these claims sometimes exceed the HOA master policy limits, leaving the owners responsible for damages either on their personal policy or out of pocket. Furthermore, if there is not enough money in the HOA fund to cover a deductible for the loss, each owner maybe assessed money to pay to cover the amount owed.
It is smart to verify what the association policy covers and obtain a copy of the policy for your records. Normally in Las Vegas the Association covers the outside only and typically the Insured would be responsible for their walls in. Having an educated insurance consultant can help individuals obtain proper coverage for a multi family style property.
