When it comes to protecting condominiums and homeowners communities from hurricanes, Florida law may not require as much property insurance as you may think – or need.
Note: This story focuses on Florida, but includes many tips applicable to the insurance needs of all condo owners.
These are tough times for shared communities across the state, and the notion of “going bare” — without insurance — to save on costs may sound appealing, but it could leave owners and communities in dire straits should the worst happen.
“Casualty insurance coverage protects property owners from damage to their property caused by acts of God, like hurricanes,” said Ken Direktor, with the firm Becker & Poliakoff, which specializes in community association law. “But there are a lot of things that insurance won’t cover, like what’s inside an owners home.”
A good rule of thumb, say experts, is to learn what the law requires of associations and owners, and consider going beyond, not below, the requirements.
“There are certain minimum insurance requirements, but that is just what the Legislature has determined would be a starting point,” said Robert Friedman, an attorney and head of the Insurance Coverage Group at the West Palm Beach-based law firm Gunster. “To only buy the bare minimum is almost always going to be a bad idea.”
He adds: “The amount of insurance an association should have is supposed to be based on appraisals and a replacement-cost basis, but there are different ways the policy can be written to save money. You could increase the deductible to save on the premium, but you want to makes the residents can finance the deductible in the event of a significant loss.”
In general, Florida requires condo associations to purchase property damage insurance, also known as casualty insurance.
Can a condo opt out this requirement? Nope. “Foregoing insurance altogether is not an option,” Direktor said.
As for HOAs, there are no state requirements for casualty insurance coverage. HOAs are usually made up of detached single-family homes and the owners are responsible for insuring their residences.
Florida condo associations are required to insure the entire property against sudden damage caused by Mother Nature, such as storms, floods, fires or other similar occurrences not caused by a person’s negligence or intentional misconduct. While the law requires casualty insurance to protect community property, including common areas, such as pools and clubhouses, the mandated coverage is limited.
For instance, state law excludes a specific list of items within an owner’s unit, including floor, wall and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments. Also not covered: personal property, including TVs, furniture, clothes and jewelry.
Another thing worth noting: There is a difference between casualty insurance and liability insurance; the latter covers damage or injuries caused by negligence or other human acts. A classic example of a liability case would be leaving a banana peel on your driveway, causing a visitor to slip and fall. Florida does not require associations nor owners to purchase liability insurance, but it is certainly recommended.
Over the years Direktor has worked with lawmakers to craft community association insurance laws. And he points out a fact that condo owners may not realize: Last year the Legislature relaxed coverage requirements to no longer force owners to purchase casualty insurance for their unit’s interior. Up until July 1, 2010, Florida law forced owners to purchase their own policies to cover what was not the responsibility of the association (floor coverings, electrical fixtures, appliances, etc.) It also allowed associations to purchase policies on the behalf of owners who did not buy it themselves and pass the costs onto the owners.
Now the law neither requires owners to purchase these polices nor allows an association to buy on their behalf. But it is worth checking your governing documents since they may require individual owners in condo to have casualty insurance, as well as owners in HOAs.
“The best approach is not to try to get around buying insurance. This only exposes the community to large uninsured losses and will impact the ability of owners to obtain financing.” Direktor said. “To the contrary, the best approach is to harden the exterior of the building by upgrading windows and doors with hurricane protection.”
By doing this, he said, you may get a discount on your premium and lessen your exposure for your deductible by reducing the amount of damage that would likely occur.
firstname.lastname@example.org or 954-356-4219 or 561-243-6686. Daniel Vasquez’ condo column runs Wednesdays in Your Money and at SunSentinel.com/condos. Check out Daniel’s Condos & HOAs blog for news, information and tips related to life in community associations at SunSentinel.com/condoblog. You can also read his consumer column Mondays in Your Money and at sunsentinel.com/vasquez.