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Personal Property & Liability Insurance...A modern-day must

If you are questioning the need for buying personal property and liability insurance (HO6), this article is a must. If you have a policy, read this article to confirm your wise decision and pass on the information to other owners.

Is a personal property and liability insurance policy necessary for condo and townhouse owners? Most definitely, and here are a few examples of why.

Scenario One:

An owner leased his townhouse to a tenant who happened to be an attorney in the military who often traveled. While the tenant was out of town on business, the water heater connection broke and sent gallons of hot water through the townhouse. A neighbor reported seeing steam on the windows and water coming out the front door. The manager found the townhouse a complete disaster with most of the drywall on the ceilings and walls down, plus the kitchen cabinets fallen with their contents broken. The manager immediately notified the association insurance company and contracted to have the work done. Luckily the association had "all-in" coverage and the owner and tenant had their own policies as well. The tenant was provided very nice temporary housing under his policy. The owner's policy paid his monthly assessments and also covered the rental income loss. The tenant's personal property was put into storage during the construction and that which was damaged beyond repair was replaced. The townhouse was refurbished in a timely manner and all parties were made whole. No one was sued.

Scenario Two:

One balmy winter morning a condo owner called the manager to report water leaking from her ceiling, possibly coming from the unit above where no one appeared to be home. The manager discovered that the unit was vacant and entered with a locksmith and a plumber. They found the heat off and water running from a frozen pipe under the kitchen sink. The plumber made the necessary repairs and winterized the plumbing. The manager went downstairs to talk to the owner and found that the ceiling had just fallen, damaging appliances, the kitchen table and the floor. (The second floor unit owner was actually no where to be found and eventually went into foreclosure!) Thankfully the first floor owner had an HO6 policy that covered the damages to her personal property as well as the attachments and improvements. She was not at all pleased when the manager reminded her that the board had chosen to save money by not buying an "all-in" policy. The association policy didn't cover any of the damages on the second floor for several reasons; the heat was off, the unit was abandoned, and the damages were not a covered cause of loss. The first floor owner was only responsible for her $250 deductible which she requested the association to pay. The board agreed to reimburse her the money since their governing documents required "all-in" coverage or made the association responsible for the damages. Later the board decided to add the coverage back into the policy.

Scenario Three:

An owner came home from work late one cold winter night and found water running down the stairs and pouring down the walls of her townhouse. She was so frightened, she called 911 and the fire department responded. They turned off the water and provided her with the number of a disaster restoration company. The owner went to stay with a friend and didn't notify the manager until the day after the company began working. The manager had never worked with this particular company before, but found that the association insurance company had when she turned in the claim. The association had "all-in" coverage, but the owner had no insurance. It was determined that a water connection to the washing machine on the second floor broke and must have been running all day flooding both floors, the garage and the crawl space. The townhouse was uninhabitable. The manager explained the financial responsibility for personal property to the owner. There was significant damage to clothing and furniture. Mold started to grow as the company could not dry out the townhouse quick enough. The owner demanded another company be hired and the insurance company agreed. The second restoration company could not work around the owners schedule and she wanted them replaced with another company to finish the job. Nine months later, the owner moved back into her townhouse. She is still unhappy, has a storage bill, damaged personal property, time lost from work, and a horrible experience!

How many more scenarios could any manager or association's board of directors add? This article could easily turn into a book if all the stories were told. In the absence of an insurance policy, or proper insurance, owners can suffer significant financial loss that could be prevented for as little as $100 or so a year. Also, for a few dollars more, owners could add loss assessment coverage to protect them in the event of a special assessment. Doesn't it make sense to pay another $15 to $30 additional a year for insurance protection instead of a special assessment for the cost to replace roofs? For example: If your association policy has a wind and hail deductible and an insufficient roof reserve, a special assessment could be necessary. This additional coverage could pay the bill!

We insure our lives, our health, our vehicles, our income, our homes, and even our travel. Doesn't it make sense to have proper personal property and liability coverage?

Beth Jones, PCAM®, AMS®, Association Times, December 2006


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