Flood Insurance - Master policy or individual?

Started by DawnL • 3 replies • 2708 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

DawnL (California)
Posts: 37

Posted:

Our CCR's currently require that we carry flood insurance since we are in a flood zone. A new buyer is purchasing a condo, and we were told that we need to increase our flood coverage because we are significantly below the lender's guidelines. Escrow is pending our decision. . .

So in reviewing the policy, we've discovered that we are significantly underinsured. $250,000 for 3 buildings (each containing 4 units). To adequately insure every unit ($200,000 replacement value each) it would cost a staggering amount (around $200 per month/per unit).

Our CCR's also have something to say about homeowner's not carrying "overlapping policies".

1. Can we ask the buyer to get a supplemental policy, even though our CCR's say something about "overlapping policies?"

2. Can we change our CCR's to require that all owners buy their own flood insurance and cancel our Association policy?

3. Can we increase our coverage for this one building, to help the escrow to close, even though that seems like an "unequal benefit?" (and then cancel all insurance coverage after we change the CCR's?)

We have 12 units. . .would love to hear how this is handled in other associations.

Thanks!

Dawn in CA

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The owner should get their own homeowner's insurance policy separate from the HOA's. There's a difference between the HOA's liability insurance and the homeowner's individual insurance. Most mortgage companies won't close until the homeowner has proof of insurance. They can't use the HOA's as proof. I almost want to lean toward the potential buyer is trying to take this approach instead of purchasing their own. It may be a simple misunderstanding than intentional. (Sounds like they have never dealt with a HOA before.)

I am glad that you have found out the flood insurance is inadequate. It's a good thing. It means it is time for the HOA to update it's policy. That will mean a possible increase in dues to cover the additional coverages but it's well-worth it. (I've had several flooding issues in my HOA. Took years for me NOT to cry when it rained and get rid of my nervous twitch!) The owner's should be aware of the situation and agree to improve the insurance coverage. The additional good news is that your area has been declared a "Flood zone area". This will make it easier to get insurance for flooding and maybe at a good rate.

I am not familiar enough with a condominium setup to say what coverages the HOA should have. I do believe each owner should have their own separate insurance policies and then "share" in the coverage that covers the entire building. That should be how the insurance is setup anyways.

Former HOA President

DawnL (California)
Posts: 37

Posted:

To clarify, I'm not talking about liability insurance. Every homeowner already has their own insurance, in addition to the Association's master policy.

The flood insurance is the issue here. Right now our premium is $525.00 on the whole property. To cover every unit (for replacement value) would cost an estimated $10,000 - $15,000 per year. This would amount to doubling the association dues to almost $500 per month.

I may need to seek professional legal advice here. I am concerned both with our liability of this guy's escrow falls through because we refused to up our coverage. . .and also with the reality that our residents (40% are delinquent) cannot afford a substantial increase in dues.

Thanks!

Dawn in CA

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I don't think the HOA/Condo is responsible for someone's escrow. That's between the seller and the buyer.

Contacting legal services is going to cost your HOA additional money. How else are you going to pay the lawyer but with HOA funds? Why not talk to your insurance company to find out your liability issue on this. Don't spend more money when it's not needed.

There's alot of things that can affect someone's closing of a home. It's not necessarily anyone's fault. We had a few fall through simply because the buyer's found out the rules of the HOA and didn't like them.

The owner's have to realize that insurance is paid by the group. That means it has to be divided evenly amongst ALL the homeowners. Even those that don't pay. You sound like there are more issues to deal with besides this insurance issue. This insurance issues just seems to be bringing everything else to a head.

Former HOA President

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here