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Insurance Coverage for Co-Ops, Condos: Common Options and Terms

September 23, 2016 Posted in Community Association Law

Reviewing insurance terms and options can often be confusing and, in some cases, overwhelming for co-op shareholders, condo owners and even community board members. Insurers and the industry in general tend to use a great deal of shorthand when discussing insurance coverage. However, it is imperative for everyone from owners to board members to have a good understanding of some of the key terms and concepts involved in quality insurance coverage.

Terms and Concepts to Know and Understand

HO-6 Policies

HO-6 insurance is an important type of insurance typically used by condo unit owners, co-op shareholders and homeowners. Such policies tend to cover the interior and contents of a particular unit (as opposed to the building’s exterior and landscaping, which is typically insured under an HOA’s master policy). More specifically, an HO-6 policy will cover one’s personal belongings, as well as the condo/co-op area from common risks, such as fires and burglaries.

Loss Assessment Coverage

This coverage is unique in that it provides condo and co-op owners with protection just in case they are required to pay a portion of a significant assessment. For instance, if someone sustains a serious injury while in the community’s common area and the court rules in favor of the injured party and renders a judgment that is greater than the association’s liability coverage, the loss assessment coverage can be used to cover a unit owner’s portion of that assessment.

Total Insured Value

TIV or total insured value refers to the amount of insurance that is purchased on a building and how the premium is calculated.


It is important for board members to know and understand the concept of co-insurance. Co-insurance involves spreading the risk among multiple parties. Essentially, an insurer can shift a portion of the loss risks back on the policyholder (which is done based on specific value ratios). Board members should make certain that they have a good understanding of this concept, as the penalties that go along with shared risks can be quite substantial in the event of a major issue.

Fiduciary Liability Coverage

Such coverage might or might not be part of the board directors’ and officers’ insurance coverage (typically referred to as D&O insurance). However, if it is included, the coverage normally protects the members of the board from liabilities associated with their leadership roles.

D&O Liability Protection

This coverage is a must as board members make decisions that condo owners, management or even other board members may not like and accordingly, those who do not like the decisions may choose to file a claim. That is, D&O liability provides reimbursement for legal costs as a result of an action alleging a wrongful act(s) was committed in their capacity as directors or officers.

Generally, there are two types of D&O coverage: bundled coverage or stand-alone coverage. The bundled coverage is usually added to the property and liability coverage via an endorsement. A stand-alone policy is usually specifically designed for a community association and it must cover committee members, association managers, employees and volunteers.

Having the appropriate amount and type of insurance coverage is imperative. Unfortunately, some boards look at buying insurance as more of a “bidding” process whereby the lowest bid wins. However, board members are encouraged to speak with several agents and find the insurance company and plan that will best represent them in the event of an incident. Without proper coverage, the financial risks are high.

If you have questions or concerns about any condo or co-op-related legal issues, do not hesitate to contact a New York and New Jersey condo association lawyer at Griffin Alexander today.

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