Flood Insurance for Condos – Unit Owner versus Master Policy
Why Do You Need Flood Insurance on the 15th Floor?
Let a Flood Nerd Explain It All!
Condominium Association Flood Insurance
Flood insurance is pretty complicated stuff. And when you are in a Condo Association, it gets even trickier. But Flood Nerds are master magicians with Flood Master policies. Flood insurance is all we do, so we understand it better than most agents.
Let’s break it down for you.
The Board Members and Management Company are responsible for buying flood insurance for the Association. This insurance covers those parts of the building that are common to all unit owners.
Even if you are on the 15th floor, you still depend on the foundation, mechanical equipment like elevators (you aren’t taking the stairs to the 15th floor are you?), and common areas like the lobby.
Your Association buys a Hazard Insurance Policy to protect against damage from wind and fire. This policy protects the Association and unit owners from loss to the structure of the building and the common areas. Exactly what it covers is different from state to state.
What it won’t cover are the foundation and the mechanical equipment like boilers or elevators and they won’t cover damage from rising water – that means a flood.
The RCBAP protects you because you have an interest in these common elements. So, you always want to be sure that your Association buys the right amount of Replacement Cost Coverage for a flood loss.
I know it seems like a drag, but you really should pay attention to what is going on at those Condo Association meetings. When your Association either underinsures or doesn’t insure at all and you have a flood, then every unit owner will have to chip in and pay for the repairs.
Flood Insurance for Individual Condo Units
You probably have an HO6 policy for your unit. This policy covers your contents and living expenses if there is a fire, earthquake, or windstorm. But it doesn’t cover flood damage.
The RCBAP policy may cover flood damage to the individual units. If this is the case, then you just need to buy flood coverage for contents. This covers your clothing, TV, computer, furniture, household goods, and the personal items that make your condo home. If it isn’t attached to the building (like cabinets and flooring) then it is covered.
If your building isn’t in a high-risk flood area, you may not have an RCBAP and you are at a high risk of financial ruin if there is a flood.
That’s because you have an interest in the building. If there is a flood, and there isn’t flood insurance you are responsible for a portion of the repair cost, no matter where the damage occurs.
How Individual Condo Insurance Protects You
An individual flood policy protects you against the folly of others when it comes to flood.
Let’s say you live on the first floor and the Condo Association buys an RCBAP that provides $250,000 in coverage for each unit, but your unit is worth $350,000. The Condo Board bought the max, but they didn’t cover the gap between the actual replacement cost and the maximum insurance. If there is a flood, your policy will cover the difference.
Now, let’s say you live on the 15th floor and there is a flood. Unit owners on the first and second floor didn’t have flood insurance. As a unit owner, you are still responsible for a portion of the repair cost. The Association imposes a special assessment of $15,000 per unit to cover the cost of uninsured repairs. Many of the building owners are howling! They don’t have that money. But you have an individual flood policy, so your special assessment is covered.
This is true if you live in a low-risk area and there’s no RCBAP coverage at all.
Any Place It Rains Can Flood
Take it from a Flood Nerd, any place it can rain it can flood.
Every year 25% of all flood claims are in areas that are not considered to be high-risk. During the flooding in Houston caused by Hurricane Harvey, three-quarters of the flooded homes were in low to moderate risk areas and 80% of those people had no flood insurance.
Just because your lender doesn’t require you to have flood insurance on your condo or your Condo Association hasn’t purchased flood insurance doesn’t mean you are not at risk.
Talk to the Condo Association about purchasing a master flood policy.
Get a Flood Nerd to give you a quote on your individual unit. If you aren’t in a high-risk area, you may qualify for a Preferred Risk Policy. If a Flood Nerd can get you this policy, the government will subsidize a portion of your premium. Then when the other unit owners are crying over the Special Assessment for flood water damage, you’ll be covered.