Condo Media - January 2019 - 49

first $25,000 of the loss would be the
responsibility of the unit owner(s).
Only when the loss exceeds that deductible limit does the master policy
step in and begin to pay out.
HO6 CAN PROVIDE
DEDUCTIBLE COVERAGE
As a unit owner, you must be wondering how you can avoid paying this
master policy deductible out of pocket.
The simple answer is to purchase an
HO6 policy.
The HO6 is home insurance for owners of co-ops or condominiums, and the
policy is purchased by the unit owner
in their own name. A properly written
HO6 policy would step in and pay out
and cover the master policy deductible.
Should the loss go beyond the deductible limit then the master policy would
step in to pay for the additional damage.
HOW DO YOU OBTAIN A
PROPERLY WRITTEN HO6 POLICY?
The HO6 policy starts out as a named
perils insurance policy. That means it
specifically lists all the perils (events
that could lead to damage) that it will
cover. If an event damages or destroys
your property that is not named on the
list, it will not be covered. The master
insurance is usually written on an all
risk basis (special form). This means
the policy covers every peril except
those that are specifically excluded.
This form is broader than the named
perils policy of an HO6.
The HO6 policy would need to be
modified in order to match the master
policy as well as pay the deductible.
To do this you would need to add coverage endorsements such as "Unit Owners Special Coverage A" endorsement
(HO 1732 or equivalent) and the "Unit
Owners Modified Other Insurance"
endorsement (HO 1734 or equivalent).
In the event these forms are not used by
the HO6 insurance carrier, its equivalent should be requested.
To ensure the HO6 has proper
limits under "Coverage A-Dwelling"
it would need to match the highest

deductible scheduled on the master
policy. In the example used previously, it was $25,000. At a minimum,
that amount should be used for this
coverage limit. Personal effects such as
clothing and furniture would not be included under "Coverage A-Dwelling."
Always consult the condo documents
to confirm what you are responsible
for in your unit.
In addition to the items previously
mentioned, it is recommended that
unit owners carry additional coverage
limits under the "Loss Assessment
Coverage" endorsement (HO 04 35
or equivalent). It protects unit owners from a loss that is assessed to the
entire association. An example would
be if a common area sustained damage
by a fire.
Purchasing an HO6 policy is a great
way for unit owners to avoid having to
pay the master policy deductible out of
pocket. Good communication between

the unit owner, the board, association
manager, and the insurance agent is
key to getting this information. It is
incumbent upon your insurance agent
to help guide you during the decision
making process. There are a host of
additional items that can be done to
dovetail the HO6 and master insurance policies to ensure the policies
that are in place are right for you and
your association.
It is imperative unit owners understand what it means to have adequate
insurance coverage to meet their obligations per the associations governing
documents and also cut down on their
own personal out-of-pocket expenses
should the unexpected occur.
■ THOMAS G. SHIELDS IS
SENIOR ACCOUNT EXECUTIVE
AND PRODUCER FOR RISK
STRATEGIES COMPANY.

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kfitzgibbon@statewiderm.com
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www.StatewideRM.com
January 2019 CONDOMEDIA

Condo Media - January 2019

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