Condo owners in places like California have something to worry about. Protecting your real-estate investment against the possibility of an earthquake is not so easy with a condominium as it might be with other forms of real estate. What's up with that? As it turns out, there are some underlying issues that you, as a condominium owner, should be aware of. Today we will discuss some of the finer points of condo earthquake insurance. We'll break down the problem into easily-digested information chunks, and once everything is clear, we'll discuss potential solutions. In a nutshell, you need to know about the following:
• What you are usually covering with your current insurance
• Homeowners Association coverage standards
• The single-family home bias and how it affects Condo owners
• Coverage cost-effectiveness from an HOA and Owner perspective
Once we've explored these items briefly, we'll follow up with what you CAN do to help protect your investment. Condo Earthquake insurance... is it worth it? Let's address the 'elephant in the room'!
• What you are usually covering with your current insurance
• Homeowners Association coverage standards
• The single-family home bias and how it affects Condo owners
• Coverage cost-effectiveness from an HOA and Owner perspective
Once we've explored these items briefly, we'll follow up with what you CAN do to help protect your investment. Condo Earthquake insurance... is it worth it? Let's address the 'elephant in the room'!
Understanding the Condo coverage dilemma
One of the first things that you need to know about 'standard' coverage is this. Your insurance typically covers the interior and the goods inside your condominium. This means that an earthquake is essentially downgraded to the equivalent of having your condominium robbed and vandalized because it doesn't account for structural damage. To make matters more complicated, your HOA is technically only required to purchase fire and liability insurance. While they are offered earthquake insurance (a requirement by California law), the HOA will generally pass due to the inflated premiums that could raise the members' dues by more than 20%! Part of the problem is that the insurance industry has a definite bias towards single-family homes. As only a small portion of their customer base, condo owners have to jump through hoops to get the same coverage. This coverage is not just expensive for the HOA, and it can be cost-prohibitive to owners as well. As a condo owner, you are going to have to take a proactive approach.
Be proactive to protect yourself
Protecting your investment is all about arming yourself with information to understand exactly what you CAN do. This is the recommended approach:
• Know your coverage
• Identify HOA coverage (or lack thereof)
• Raise awareness of the issue with HOA members
• Explore individual coverage
First and foremost, you need to establish precisely what you are covered for. Do you have insurance only for interior goods, for instance? What about structural? Next, have the homeowners opted for earthquake insurance, and if so, what is the length and breadth of this coverage? Suppose the HOA has provided insufficient coverage or has opted-out of earthquake insurance. In that case, the next step is to share information with the other owners. Ask to bring it up at meetings or have an informal get-together. Make everyone aware. If the HOA refuses or raises awareness that might 'get you in trouble' (you know what we mean!), then explore personal options. Some providers such as California Earthquake Authority offer statistic-based, rather than 'inflated guess' coverage, which you can take advantage of. Shop around for at least a month to get the best rate.
• Know your coverage
• Identify HOA coverage (or lack thereof)
• Raise awareness of the issue with HOA members
• Explore individual coverage
First and foremost, you need to establish precisely what you are covered for. Do you have insurance only for interior goods, for instance? What about structural? Next, have the homeowners opted for earthquake insurance, and if so, what is the length and breadth of this coverage? Suppose the HOA has provided insufficient coverage or has opted-out of earthquake insurance. In that case, the next step is to share information with the other owners. Ask to bring it up at meetings or have an informal get-together. Make everyone aware. If the HOA refuses or raises awareness that might 'get you in trouble' (you know what we mean!), then explore personal options. Some providers such as California Earthquake Authority offer statistic-based, rather than 'inflated guess' coverage, which you can take advantage of. Shop around for at least a month to get the best rate.
So, condo earthquake insurance... is it worth it? Ultimately you will need to decide that. Suppose the HOA is unable or unwilling to offer coverage. In that case, you must go the private route and factor the costs against what you will be dealing with should the worst occur. The single-family home bias is quite the hurdle. Still, by selecting a provider with a statistical focus for your particular region, you should be able to lessen the financial impact of the normally-inflated premiums. Take your time and shop around, and it might be fruitful to query the other condo owners to see if they recognize the pitfall as well and, if so, what the consensus is on potential HOA dues increase and a ballpark percentage they might consider. You'd be surprised what the HOA might do if you've already laid the groundwork. Now you know what you can do, so it's time to get proactive and protect your investment!