Today we share the second installment of the top 10 questions asked by Board Members and Community Managers regarding HOA and Condo Association Insurance!
By: Brian J. Finnerty (CIC), Area Sr. Vice President, Arthur J. Gallagher Risk Management Services.
Question # 2:
What is Co-Insurance?
Co-Insurance is a provision that can be found on many property insurance policies. This provision states that the insured must carry a certain amount of coverage in order to have a claim paid in full. Most Co-Insurance provisions suggest either 80%, 90%, or 100% of the buildings value be covered at the time of the loss in order for the loss to be covered in full.
For example, if you have a $1,000,000 building and 90% Co-Insurance you would need to carry at least $900,000. If you carried less than that at the time of loss the insured performs a calculation based on what you did carry and pays that percentage of the claim.
This can be difficult for a board to keep up with since labor and material costs are rapidly inflating. There are better solutions to programming your insurance policy. I suggest the board get “Agreed Value” endorsed to the policy. This negates any Co-Insurance provision that may already be on the policy. I also suggest the board routinely review their valuations for re-construction cost. The best way to do this is by getting an appraisal done or knowing your square footage of your buildings so that an accurate cost per square foot analysis can be done.
Next week question #3 will be revealed!