Last month, I had the honor to present with Traysee Fuqua, CMCA, AMS, PCAM at a luncheon for CAI BayCen. The subject was “Bridging the Gap – Preventing gaps between HOA and Homeowner’s Insurance.” Coverage gaps can occur when the type of coverage carried by the association is assumed but not confirmed.

Take, for example, a condominium community. A new buyer may have received information from their real estate agent that the HOA’s insurance “covered everything.” But a review of the insurance disclosure reveals that the HOA carries only bare walls coverage. If the owner is not diligent in confirming what coverage they need on their HO6 policy (condominium owners policy), there may be a coverage gap.

If that owner believes that the HOA “covers everything” and purchases an HO6 policy with no coverage for the unit interiors, what happens when there is a claim? Let’s say there is a fire, and the unit is destroyed. The HOA’s policy will pay to rebuild the unit up to the drywall and bare subfloors (bare walls). The HO6 policy should pay for the personal property of the owner that was destroyed, for example furniture and clothing. But what about the paint on the walls, flooring, and kitchen cabinets? Those items are not covered by either policy, thus are in the coverage gap. The unit owner will have to pay for those out of their own pocket.

It is important to communicate not only what type of insurance is carried by the HOA, but also what type of homeowner’s coverage should be carried by the unit owners. This can be detailed with the disclosure that goes out with the budget each year but should also be discussed in newsletter articles and new owner packets. If you need help with writing up these communications, let your insurance agent know.

Terri Guest, CIRMS, CMCA is the Northern California Sales & Marketing Representative for Berg Insurance Agency and can be reached at Terri@berginsurance.com.