For every real estate investor, residential multi-family homes are one of the key features of their portfolio. Not only the investment brings in regular returns but also promises an appreciation over time.
However, to protect the investment, real estate investors also need some sort of insurance cover.
In this article, we will be discussing condo master insurance, in particular.
What is a Condo Masters Insurance?
As the name suggests, the insurance policy is meant for what the masters of a condo complex own collectively. In general, these are the property inclusions that members of the community share with each other.
For example, a community swimming pool in the complex, or the hallways and the exterior walls.
When insuring a complex, there’s more than just insuring the outer structure or the buildings.
A condo masters insurance generally covers damages to the exteriors of the complex, and sometimes, also parts of interiors. Now the damages can be caused by a natural calamity such as floods, earthquakes, or hurricanes. Or sometimes, acts of vandalism may also be a cause of the damage.
Depending upon the extent of the coverage of the master insurance, one or more damages can be covered.
What does it cover?
When you invest your capital in a multi-family condo complex, you surely would want it to keep bringing in returns. Notably, structural damages, or even damages to the areas surrounding can hamper your capital growth.
In general, a condo master’s insurance covers four things.
The Condo Structure
The primary and the most important feature to protect for your real estate investment is its structure. It not only covers the wall surface but internal components such as the insulation and the skeleton as well.
It needs no mention that any damage to these features of your property can easily rake up the costs in maintenance. To avoid paying all the expenses out of your pocket, “you need a condo master insurance policy” in place. Not only will it cover the costs of repairs but also the cost of replacement, for severe damages.
Some of the common inclusions to structural coverage are bare walls-in, fixtures, flooring, wiring, installations, etc.
The Common Areas
Next comes the common areas within the community. In most cases, the condo unit owners share a lot of common areas. These include the swimming pools, gym area, fitness centers, community halls, etc.
Since no single owner takes possession of these common areas, the HOA is responsible for maintaining these areas. And in case, if any damage is caused to these areas, the HOA is required to pay for the repairs and restoration.
As an investor or the master owner of the complex, you are designated with this duty to ensure that your master insurance plan coves these common areas.
The Surrounding Grounds
Not only the areas that are constructed are covered under the condo masters insurance plan but also the area that surrounds the structures. For example, the common playgrounds surrounding the common area.
Now, you may think about what is there to insure on an unconstructed ground. Well, read this – there are lamp posts, HOA-owned hoardings or displays, sheds, and sometimes also fitness equipment for kids that are constructed on common grounds.
And it needs no mention that any damage to these small structures or installations can be very costly at times.
The most important feature of any insurance policy, especially home insurance policies is liability coverage. And this holds true for condo master’s insurance as well.
Consider this situation, if somebody gets injured in the common areas, the unit owners won’t be liable to pay compensation but the HOA.
Liability coverage protects the housing association and the investors against any legal conflicts down the line.
Assessing the cost of Condo Masters Insurance
Like any other insurance policy, the cost of master’s insurance also depends on the coverage features. In other words, what’s included and what’s not would eventually decide the cost of the policy.
However, there are still some things that you must consider when buying a condo master’s insurance.
The term of the policy
The first thing to affect the cost of the insurance is the term of the policy. In general the longer the term, the more the price. However, the increase in the cost of the policy is not directly proportional to the term but grows gradiently.
The next thing to affect the cost of the policy is the liability coverage. It is noteworthy that in most states, the minimum liability is decided by state laws. And this minimum liability cover is standard for most insurance plans. But, in case you decide to extend the cover, the cost would also increase.
Extent of coverage
Depending upon what areas of the complex you include into your cover, the cost can vary. For example, if there is no common swimming pool within the complex, the cost can be expected to be lower than what would have been with a swimming pool.
Rate of insurance
Last of all is the rate that your insurer would charge you. It is noteworthy that the rate of insurance can vary from insurer to insurer. On top of that, the rate would also vary with the term of the insurance policy you buy. As a rule of thumb, the rate reduces with the increase in term length.
Taking note of these features when buying a master insurance plan for your condominium complex can surely help you save a lot of money. Not only that you can also consider the tax features of the policies you’re shortlisting. Some policy types are exempt from tax while others are highly taxed.