Insuring Your Building: 5 Things That can Bite You
What do most trustees consider the deciding factor when shopping for insurance coverage for their condo association? Most of the time it comes down to price alone, that is as long as the amount of building and liability coverage are comparable. This is natural when a small number of people are accountable to all of the other unit owners and the main message they hear all of the time is to control costs. While this can be prudent I often see some coverages missing or limited that are vital in the event of a claim. Imagine the following scenario, your building burns down, blows up, blows down (whatever) and now needs to be replaced. Here is a list of my top five things that can bite you if they are not covered properly:
- Business Interruption insurance: Consider the following: you have great coverage on the building which will be replaced without a hitch after a year or so. But how does your association continue to pay its expenses while waiting for the work to be completed? Are all of your unit owners going to be able to continue paying condo fees while they scramble to find living arrangements elsewhere? This coverage is intended to do just that and while being one of the most important to have in place it is one of the most overlooked. And if it is not in place, guess who gets blamed (and sued)? Which leads to the next item:
- Directors and Officers Liability coverage: General liability insurance covers property damage and bodily injury claims only, not bad decisions like not including business interruption coverage on your master policy. D & O liability insurance fills in this gap. I personally would not serve on any board without this in place; there are too many nut jobs out there (you know who I am talking about).
- Ordinance or law coverage: Your building has no sprinkler system. Maybe it is not handicapped accessible or it does not comply with any number of other code requirements that have been instituted by your local and state government since it was originally built. You have replacement cost coverage; you figure you’ll be OK. Wrong. Replacement cost coverage only replaces what you had before. An Ordinance or Law endorsement on your policy will provide a greater amount of money for any of these required building upgrades.
- Debris Removal: Standard insurance policies have a very limited amount of money available for this but these costs have risen dramatically over the years because of a number of factors including the difficulty of finding a site to take the debris and dealing with new environmental regulations. This will help make up the difference.
- Equipment Breakdown: Your building did not burn down, blow up or blow down but your heating system did and needs to be replaced. Again, regular building coverage does not address this. Equipment breakdown does, as well as many other systems important in making your building function. Normal maintenance and aging issues are not covered.
Take a look at your current policy to make sure that these issues are addressed in a sufficient manner. If they are not, either change your policy or don’t have a claim. If you have a claim, run as fast as you can so you don’t get bit!
Bob Hollis began his insurance career in 1978, primarily working with small business owners on their employee benefit plans and financial planning needs. He became a Certified Financial Planner in 1988 and expanded his agency’s services to property and casualty insurance at the same time. While the agency provides services to many different businesses they have special expertise in working with churches and non-profits, condo associations and the hospitality industry.
Connect with the Hollis Insurance Agency on their website found at www.hollisagency.com or on their Facebook page found at www.facebook.com/hollisinsurance.