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What Does Your Association Insurance Actually Cover?

If you currently live in an owners' association in Florida or are thinking about investing in one, it's important to understand what type of insurance policy the community has and what type you will personally need to secure for your unit.

When determining what type of insurance coverage to obtain, associations have the choice of insuring their communities as "condominiums" (governed under Florida Statute 718) or as "townhomes" (governed under Florida Statute 720). For insurance purposes, some associations may choose the former, as it has been historically less expensive for the association to insure the community this way. The best way to know what type of insurance your complex has is to take a close look at the governing documents. Within the bylaws should be language tied to  insurance and to what extent it covers the community.

If your community abides by Statute 718, then the typical "walls out" coverage applies - meaning that anything outside of your unit's drywall (i.e. roof, balcony) are covered by the association's policy. However, if the community abides by Statute 720, the individual owner is now responsible for the entire structure, whether inside or outside of their unit, including the exterior walls and roof. The association would still insure common areas in the complex. If your complex is insured as a condominium, you will only require "walls in" coverage through a HO6 policy. However, if the community follows 720, you'll want to be sure to secure a HO3 policy, to cover any possible claims that may result from damage both within or outside of your walls.

How can a townhome community insure as a condominium community you ask? Well, townhomes are governed as HOAs, which by definition is "an organization that makes and enforces rules and guidelines for a subdivision, planned community or condominium building," which gives them the leeway to choose the way they want to provide coverage.

Regardless of your situation and your communities' governing bylaws, we don't expect you to be an insurance expert - so be sure to reach out to us with any questions. It could save you an awful lot of money and heartache when the time comes to file a claim! As always, we are here and happy to answer any insurance-related questions you may have - even if you are not our client. Reach out anytime!

Kirk Ball, CIC, is the Principal Agent & Owner at Wren Insurance.