Monday, February 9, 2009

Condo / Townhome Insurance - Watch Out!!

I recently worked with a client who had an interesting dilemma. It made me think, how many Town home owners are under insured? Since Condos and Town homes are written on the same policy form, how would this apply to my client?

In the typical Condo / Town home insurance policy, the dwelling rebuild cost is figured based on the square feet between the INTERIOR WALLS. The homeowners association takes care of the exterior as you share at least one common wall with the neighbor(s) next door. You should check with your homeowners association as to what their fire insurance policy covers and at what value, then talk to your agent about how much insurance you need.

In this case, the client was purchasing a Townhouse that had no common walls with the other units. Quoting it as a Condo / Town home, the dwelling coverage was much lower than was appropriate. After some thought, I e-mailed underwriting and asked if they would accept the property on a dwelling fire policy. Dwelling fire is the most basic of insurance policies. It is typically used by landlords for insuring the property they rent out to others, but can be used for owner occupied homes, commercial buildings, etc. Underwriting agreed that it should be written as a dwelling fire policy, but that theft is not covered on their policy form. What, no theft coverage?!! What if their Townhouse was burglarized! They would have no coverage! Not acceptable. Since my philosophy is that if I do not have a policy that will work for that client, refer it to someone that can help them, I referred the client to a colleague of mine who had a good source for the client and everything worked out.

I know you are thinking: "In the current real estate market my insurance company has me insured for way more than I paid for my home! How can I be under insured?!"

Well, your insurance carrier along with mine and everybody else's is concerned with the replacement cost of your home, be it a Condo, Townhouse, Mobile Home, or a Site Built Home. They have to look at rebuild costs including materials, labor, permit fees, inspection fees, etc. In a large disaster, demand for materials and labor will probably go up and so could the cost. The real estate market determines prices based on what homes that are similar to yours and in your area are selling for. Big difference.
Remember when you are shopping for insurance, asking a question is a good thing. If your agent is pressuring you to sign anything before they answer your questions, find another agent