Property insurance is one of the two most important coverages (the other is general liability insurance) for common interest development communities or homeowner associations, and is typically part of a “master policy” that covers all units. Its purpose is to minimize the exposure of the community to financial losses from fire, flood, lightning and other perils.
The HOA’s property insurance pays to rebuild the structures and common area elements in the event there is a major loss. It covers land, buildings, structures and personal property owned by the association along with the fixtures, furniture and appliances that are outside of the individual units. It may also include coverage for signs, landscaping, sculptures, fountains, pools, recreational facilities, awnings, fences and carports.
The amount of insurance should equal the actual replacement cost of the buildings. It’s important to have a professional appraisal to be sure that the replacement cost of the property is valued properly. If undervalued, large out-of-pocket expenses may be required of homeowners to make up the difference before the insurance carrier pays for damage repairs.
FHA, Fannie Mae and Freddie Mac have insurance standards that change regularly. Also, individual homeowners can purchase property insurance, and poorly written CC&Rs may create problems if an association’s property insurance policy has not been designated to be primary in case two policies are in effect on the same property. These situations are best addressed by brokers, such as Loris Moradian Insurance Agency, Inc., that specialize in insurance for common interest developments. Contact us today to discuss your homeowner association insurance needs.