Condominium insurance policies may be one of the most misunderstood personal insurance policies available today. Because the unit owner does not own the building itself, many unit owners believe that they are not responsible for damage to the structure and that they only need be concerned with insuring their personal property and liability. It is this kind of thinking that can lead to a significant gap in coverage when an accident happens in the unit damaging the structure. Make sure you are familiar with the insurance requirements as outlined in your condominium association agreement. Just because the association has a master policy insuring the building and premises does not mean that you are not responsible for damage to any portion of the structure.
Association agreements and/or by-laws detail what each unit owner is responsible for and what the association itself is responsible for. Many association agreements state the unit owner's responsibility as "studs in". This means that the unit owner is responsible for damage to everything inside of the studs within the walls. This includes drywall, paint and wall coverings, kitchen cabinets and countertop, carpet and tile, and any other permanently installed item within your unit. Some agreements make the association responsible for all permanently installed floor, ceiling and wall coverings and all permanently installed fixtures, such as cabinets and countertops. In this situation the unit owner typically requires very little "Dwelling" coverage on their own condo policy.
In addition to property damage that you may be responsible for, you can also be assessed a portion of a loss to a common area of the association.
It's vital to understand your responsibilities as they are outlined in your condo association agreement or by-laws in order to make sure your own unit owners coverage provides appropriate endorsements and coverage amounts to fill the gaps that may exist between your insurance and the association master policy.
If your agent has the opportunity to review your association by-laws he or she will be better prepared to assist you in arranging proper coverage for your unit owners policy.
All unit owners coverage should include increased loss assessment coverage and and special causes of loss coverage for dwelling, even if you only carry $5,000 of dwelling coverage.