Condo Owners, Do You Know What Your Insurance Covers?

Condominium building

Condo ownership can bring with it the investment value of owning a home, while also bringing the advantages of communal living. There are unique aspects of owning a condominium that every Maryland condo dweller should understand. Possibly chief among these is the subject of insurance.

Master and individual condo insurance policies

There are typically two forms of insurance that cover a condominium: a master policy purchased by the condo’s association, as well as an individual, or HO-6, policy that covers each unit. The two different policies cover the following:

Master association insurance policy

Under the Maryland Condominium Act, condo associations are obligated to purchase a master policy that covers any damage to common areas, the building structure, and individual units, aside from improvements to the unit made after the developer transferred the unit to the first owner.

When damage occurs to areas covered by the master policy, the association will typically distribute the cost of the deductible among the owners in the association. However, when damage originates from a single unit, the owner of that unit will be responsible for paying up to $5,000 toward the master policy’s deductible. The owner will bear this cost regardless of whether they did anything wrong to cause the damage. For example, whether a fire was started by a defective electronic device in your unit, or by a candle you let burn while you weren’t at home, you would be obligated to pay the deductible after damage occurred to other units. When damage originates from outside of the unit, but merely passes through your unit while on the way to other units, you will not be held responsible for the deductible.

Individual HO-6 policy

These policies cover any improvements you make to your individual unit, such as the value of flooring you had installed or appliances you purchased, as well as the value of your personal property. These policies must be purchased by individual condo owners, and can be made to include the cost of the master association deductible in the event that damage to other units originates in your unit.

Common element or not?

Legal complexities can arise when damage is caused by something that may or may not be a common element. One common example is flooding damage. Let’s say a pipe breaks within your walls, causing flooding damage to your own unit as well as surrounding units. Under certain circumstances, the pipe may be considered a common element of the building, and not of your particular unit. In this case, you would not be held responsible for the deductible. The condo association may argue that the pipe broke due to your negligence, or that the pipe is not, in fact, a common element, making the deductible your responsibility. In these cases, you may benefit from consulting with a knowledgeable Maryland real estate attorney to determine how to proceed.

For assistance with a legal issue regarding home ownership, homeowner’s associations, or another Maryland real estate issue, contact the seasoned and knowledgeable Annapolis real estate attorneys at the Law Offices of Matthew S. Evans III for a consultation, at 410-626-6009.

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