Renter "HO-4" Policy. Renters can be required to carry an HO-4 policy which protects their personal property against loss and limits exposure to personal liability claims.
Owner "HO-6" Policy. Owners can be required to carry an HO-6 policy ("Homeowners 6" or "Condominium Unit Owner Policy"). Without it, condominium owners are exposed to loss and are more likely to sue the association to cover their losses. Moreover, the secondary mortgage market (Fannie Mae) now requires protection for owners. Owners' insurance should cover the following:
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Personal Property. This coverage insures unit contents such as furniture, clothing, dishes, appliances, computers, etc. Owners with high-value jewelry, art, or collectibles will need a "scheduled or unscheduled floater."
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Personal Liability. Even though associations carry premises liability for the common areas to cover claims for bodily injury or property damage, it does not cover injuries or damage inside an owner's unit. Condo owners must carry their own personal liability insurance in the event someone is injured in their condo. This should also cover injuries in neighboring units caused by fires or floods originating in an owner's unit.
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Loss of Use. This protection pays for extra expenses (hotel, restaurants, etc.) while the owner's home is uninhabitable because of damage.
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Loss Assessment. Loss assessment coverage covers the owner's portion of special assessments levied by the association resulting from insured losses.
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Walls-In. To satisfy FHA requirements, an owner's real property coverage needs to be a "walls-in" policy, instead of "bare walls." This insures improvements not covered by the association's master policy, such as hardwood floors, carpet, kitchen cabinets, plumbing, and electrical fixtures, etc.
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Earthquake Loss Assessment pays for losses related to an earthquake.
Recommendation: Associations should amend their CC&Rs to require both owners and tenants to carry insurance. To avoid potential liability, the amendment should also relieve the association of enforcement requirements related to the amendment. In addition, boards should regularly publish reminders that owners and renters need to carry their own insurance.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.