A Costly Oversight 

One of our agents recently spoke with a friend that unfortunately suffered a loss while owning a condo a few years ago.  While they were out of town, a toilet malfunctioned in the unit above them and caused severe water damage.  The owner of this unit was also out of town and unable to fix the problem.  The water destroyed most of their personal property and caused additional damage to their flooring, baseboards, drywall and kitchen cabinets.  They had insurance but later found out that the whole loss wasn't covered.

Their insurer quickly explained that their personal property would be covered up to the limit on their policy and actually paid that out rather quickly.  But that's where the coverage stopped.  The policy they had did not provide coverage for the interior building damage.  They sought coverage from the association's master policy but were told that it only covered the exterior structures and nothing inside the units.  He also told me that they were unable to subrogate, or get payment from the unit owner that caused the problem.  This loss ended up costing them upwards of $50,000 out of pocket in repairs.  All of their savings was immediately exhausted.

This was an unfortunate event that could have been avoided. 

Helpful Suggestions

1. Make sure that your condo owners policy will cover interior building damage.  Think of these items as those that would be stationary if you were to tip the condo up-side-down.  Drywall, baseboards, fixtures, kitchen & bathroom cabinetry, doors, etc...  If your policy doesn't cover these then all you really have is a renter's policy to cover your personal property.
2. Review the insurance parts of your sales contract and/or association documents.  These should clearly state what is to be insured by the association.  This typically includes the exterior structures, clubhouse, and common area liability.
3. Find out what your coverage limit is for Loss Assessment.  If a loss occurs that exhausts the assocation's policy then each unit owner may be assessed a proportionate part of the remaining loss amount.  This might be a liability loss in a common area or loss to a common building like a clubhouse.  A standard policy might include $1,000 coverage for loss assessment.  Higher limits like $5,000 or $10,000 are recommended and can be purchased for very little premium.
4. Be thorough with your agent and ask lots of questions.

Final Thought 

Although a Condo Owners policy is relatively inexpensive, make sure that you don't settle for the cheapest policy.  The true price you pay may be much higher is a loss isn't covered in the future.