Insurance worries for condo owners

"With actual cost-value coverage, there's depreciation based on the age of your contents," Cullina says. "If the TV was 2 or 3 years old, we'd go see what it costs today and calculate the depreciation."

In this example, the person who lost the television would receive a check for the amount that the TV was worth after two or three years of wear and tear.

By contrast, a person with replacement-cost coverage would receive a check for what it would cost to replace the old TV with a new one. Depreciation is not used in the replacement-cost model.

"I strongly recommend replacement-cost coverage for your contents, especially in a condominium association," Cullina says. "So if you had a loss, the insurance compensation would replace what it would cost if you were to buy it today."

Have you insured contents and structure?

When insuring your condo, make sure you have coverage for contents and structural items.

What's the difference?

"I often tell my customers that if they were to turn their condo upside down, everything that falls out is a content," Sutz says. "Everything that stays is interior structure."

The latter would include flooring, wall-to-wall carpeting, lighting fixtures, countertops and cabinetry.

Condominium owners should approach insurance needs from a slightly different perspective compared with owners of single-family homes. Someone who owns a stand-alone single-family home typically looks at the price of replacing the structure (usually a house) first before determining insurance coverage for the possessions inside the structure.

Condominium unit owners should take the reverse approach, Cullina says.

"Condominium coverage is really built off your contents," he says. "You look to see what you have: electronics, furniture, furnishings, rugs, etc. That would be the first thing you need to assess to determine the value of your contents."

Next, determine which structural items inside your four walls you are responsible for insuring.

"You definitely need to gauge what all those things would cost if you had to replace them," Cullina says.

Sutz notes that from time to time there are gaps between what the condominium association covers and what a personal condo policy covers.

"I often ask customers to fax me the part of their bylaws that describes the common elements so I can figure out if they need anything in between or expanded coverage," she says.

For example, people need coverage if there is damage to the building that begins in a common area but continues through a unit owner's front door and into the unit.

"There are so many different possibilities of where there could be a gap," she says.

Sutz also specifies the need to insure special items, such as artwork, jewelry and furs.

"Every customer should be aware and talk to their agent about any special items and possessions they might have," she says. "An agent will typically ask about art or jewelry or fur, but things like baseball card collections, stamp collections and things of that nature may not come up in conversation. They should really think about what they have that is important to them so they can make sure they're covered in case their policies are limited -- jewelry, for instance, can often be limited unless you get expanded coverage."

Are you covered for flood and wind damage?

The U.S. government offers flood insurance to all homeowners. This coverage is often optional but may be mandated by the mortgage holder if the property is in a flood zone.

Cullina says the condo association should discuss the kind of coverage that's appropriate because a flood would generally affect the building's structure and coverage would likely fall under the association's master policy.

It is also worthwhile to consider personal flood insurance, Sutz says. Coverage is generally available through the National Flood Insurance Program, which is run by the federal government.

"The individual unit owner can buy their own flood insurance because the association's flood coverage probably won't cover anybody's personal contents or the interior structure," Sutz says. "The association insurance will rebuild the building, but if you're in a flood plain and the mortgage company requires the condominium association to have flood insurance, they're going to require the unit buyer to bring a certificate saying you have flood insurance to the closing.

"This is a warning light to the buyer and the customer to get personal flood insurance."

Sutz is careful to note that there is a difference between flood insurance and water backup coverage.

"Water backup coverage isn't federally mandated, but it's a very good idea to have if you're in a space where perhaps the basement has a lot of storage area and there's potential for damage to your personal items if water backs up through your sewers and drains. Sometimes people get this mixed up with flood insurance."

Slattery notes that coverage for windstorms would generally be covered under the standard condominium policy unless there is a specific exclusion attached to the policy.

"If windstorm is excluded, the consumer may purchase wind coverage through the state's wind pool association," Slattery says.

This article was reported by Mark Terry for Bankrate.com.

Updated July 14, 2009

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