Condominium Coverage Definitions
The HO-6 policy is a special form of homeowners that was designed to meet the unique insurance requirements of owners of condominium units and cooperative apartments. An insured can only qualify for an HO-6 policy by being an owner-occupant of a residential condominium unit or a cooperative apartment. The insured premises are defined as the unit where the insured resides. An HO-6 policy can not be used to insure a unit owned by the insured but rented or leased to others. The condominium unit is defined as the space between the walls, ceiling, and floor. Sometimes unit owners are responsible for parts of the unit beyond the walls, ceiling, and floor. Condominium unit owners also have an individual interest with other unit owners in common areas of property. Common areas of property could include the land, stairways, halls, parking and storage areas, and the heating and cooling system. The unit owner’s responsibilities are usually outlined in the condominium agreement and bylaws. The major loss exposures for unit owners are loss to real property, loss to personal property, and legal liability. The following is a basic outline of the HO-6 policy and the endorsements most widely used on the HO-6 policy.
This coverage applies to the insured’s real property, which is the unit. Coverage is provided on a named perils basis and is separated into four categories.
The first category includes alterations, appliances, fixtures, and improvements (such as built-in appliances and cabinets, electrical fixtures, and similar items of this nature) that are part of the building and contained within the residence premises.
The second category relates to items of real property that pertain exclusively to the residence premises, such as exterior glass or trees and shrubs that may be located on a patio that is part of the residence premises.
The third category includes property that is the responsibility of the unit owner to insure under an agreement of a corporation or association of property owners. Insurance for this category of property provides coverage for any portion of the common areas of the building that the association agreement states is the insurance responsibility of the unit owner.
The final category of property relates to structures owned solely by the insured at the residence premises. This category could include a private garage at the residence premises.
LOSS OF USE:
This coverage is provided if a loss is caused by an insured peril to covered property or to the building containing the property and if it makes the residence premises unfit in which to live. The limit of insurance is 40 percent of Coverage C limit.
LOSS ASSESSMENT COVERAGE:
This endorsement increases the limit of liability for the loss assessment coverage provided in the policy.
LOSS ASSESSMENT COVERAGE FOR EARTHQUAKE:
This endorsement provides coverage for loss assessment due to the peril of earthquake and made against the unit owner by a corporation or association of property owners.
This coverage will pay the necessary medical expenses that are incurred or medically ascertained within three years from the date of an accident causing bodily injury to someone other than an insured. Coverage applies to accidents that occur on the insured premises, or any location, when caused by action of the insured.
This provides coverage if a claim is made or suit is brought against the injured because of bodily injury or property damage caused by a covered occurrence. Personal liability has a basic limit of $100,000 per occurrence, which can be increased for an additional premium.
This coverage limit applies to the personal property of the unit owner. The limit of insurance is selected by the unit owner. The unit owner’s personal property may include such items as furniture, clothing, television and stereo equipment, books, records, compact disks, and tapes. It could also include any items not considered part of the building structure. Items such as carpeting, if placed over finished flooring, would be considered personal property. Carpeting placed wall to wall over a rough subfloor or concrete slab is usually considered part of the building.
UNIT OWNERS: SPECIAL COVERAGES (A):
This endorsement can be used to change Coverage A of the HO-6 to provide coverage for risk of direct loss. When this endorsement is used, all direct loss to real property (which is the unit) is covered unless specifically excluded.
UNIT OWNERS: RENTAL TO OTHERS:
This endorsement provides property and liability coverage for the unit owner while the residence premises are regularly rented or held for rental to others. Theft coverage is provided for personal property at a rented condominium; however, high value items are not covered. Coverage for medical payments is also included.
UNIT OWNERS: SPECIAL COVERAGE (C):
The HO-6 provides coverage on a named-peril basis when this endorsement is added. Coverage C is changed to provide coverage for all direct, personal loss unless specifically excluded.