Why Condo Unit Owners Need Earthquake Insurance (Even if the HOA has Coverage)
You own a condo either as your primary residence or as an investment property. You checked and found the HOA carries earthquake, so you feel protected. However, does that give you the protection you really need?
The HOA earthquake policy does provide important coverage. It pays for damage to the outside structure of your unit, structural damage to the building, and includes damage to common areas like pools, walkways, garages, and recreation rooms. To cover these items for all buildings in the complex, the HOA coverage must include high coverage limits to adequately cover the significant damage that could occur.
The challenge is the deductible for the HOA earthquake policy is likely high (typically 15% – 20% of the total coverage).
As an example, a 50-unit complex will likely have a $1,500,000 or higher deductible. Most HOAs of that size do not that have that in reserve and will assess the unit owners to cover the deductible. These assessments are usually in the $30,000 – $40,000 range per unit. This Loss Assessment is just one of the exposures your HOA earthquake policy does not cover.
The balance of this article covers your earthquake exposures the HOA does not cover and can be covered by your own earthquake policy.
Loss Assessment – As described above, HOAs do not have enough in reserve to cover the HOA earthquake deductible, and therefore assess the unit owners to pay.
Interior Damage to the interior of your unit – Most HOA CCRs outline that the unit owner is responsible for damage inside their unit. Therefore, if an earthquake results in wall cracks, damaged cabinetry, tile walls/flooring, or plumbing fixtures, these will not be covered by the HOA policy.
Damage to your personal belongings (furniture, electronics, etc…) – HOA earthquake policies do not provide any coverage to repair or replace your belongings.
The additional cost to live elsewhere or lost rental income while repairs are being made (Remember- your loan payments will still be due every month). Your Association’s policy does not cover any extra expense you incur to move or live elsewhere or any lost rental income you are unable to collect while your unit is undergoing repairs. It’s important to remember that an earthquake causes damage over a wide area and the cost to live elsewhere can be significant as many people are suddenly looking for alternative housing in the same area.
Earthquake insurance for Condo owners typically ranges from $40/month to $100/month depending on coverages needed and the expected likelihood and impact of an earthquake in your area. Please reach out to us if you have questions about this important coverage.
We can help you Evaluate your earthquake options; Educate you on how each will work for you; and Explain it in easy to understand terms so that you can make an informed choice.