Most new condominium owners are woefully uninformed about the condominium exposures they face and will welcome information and guidance from an insurance professional. Condominium association and unit-owner policies mesh to provide sound protection for the individual's property exposures, an individual’s liability exposures and to cover collectively owned property and related exposure to third-party claims.
The two contracts are products of years of challenging work by insurance industry policy drafters, which started with the introduction of the condominium concept. Those writing the policies have had to consider state laws and other legal issues. They also had to contend with the pioneering and ongoing experience of insurance companies. The unique and complex risks of condominium ownership and the responsibilities of association board members and officers, consequently, have been minimized.
Condominium association forms are adaptations of general business property forms. Policy provisions have been modified for the distinct residential and commercial condominium needs. Condominium unit-owners forms are available under commercial condominium programs for business and professional occupancies.
The law of condominiums in each state contains a broad definition of "common elements" and "unit." Bylaws and declarations developed for each condominium to amplify and provide precise, detailed definitions of the terms. The policy drafters, with input from legal authorities, have fashioned provisions in the pertinent insurance forms and employed language that addresses the requirements. They continue to monitor statutory developments and experience of insurance companies, and to clarify and amend coverage in revised editions of the forms as warranted.
Building coverage in forms drafted for associations includes property within the generally accepted meaning of "common elements." Property within the air space (condominium unit) enclosed by the unfinished surfaces of perimeter walls, floors and ceilings, to which a unit-owner has title and sole interest, is covered by the (homeowners) unit-owners policy.
Building coverage under a condominium association coverage form applies to the building(s) or structure(s) described in the declarations, for which a limit of insurance is shown. It includes: completed additions; fixtures outside of individual units; permanently installed machinery and equipment; association owned personal property (located outside the units and used for condo property maintenance); and, when in a unit, fixtures, improvements and alterations that are part of the building and appliances.
Business personal property coverage in an association policy includes coverage for personal property owned by the association (owned indivisibly by all unit-owners) and leased personal property.
Individual unit-owners property coverages are similar to those of homeowners contents broad form 4 and in personal property coverage (C) of homeowners broad form 2. A significant modification, brought about by the special nature of condominium ownership, is the inclusion of dwelling coverage (A) for specified and limited kinds of property. Dwelling coverage in the unit-owners form covers: alterations, appliances, fixtures and improvements that are part of the building, and property which is the unit-owner's insurance responsibility.
The association policy and the unit-owners policy contain carefully crafted language that clarifies which policy applies in certain situations, a prime example being loss to alterations, appliances, or improvements. Installations, at the unit-owner's expense, of such items as interior walls, bookshelves, wall mirrors, a whirlpool bath or sauna, a built-in stove, or microwave were subjects of uncertainty in the early days of condominiums.
Current association policies, in general, specify that building coverage therein applies, when the association is required by declarations and regardless of ownership to insure: fixtures; improvements and alterations that are part of the building (structure); appliances for refrigeration, ventilating, cooking, dishwashing, laundering, security or housekeeping. Other insurance provisions in a unit-owners policy state that insurance is excess over association insurance covering the same property covered by the unit-owners policy.
The upshot is that the owner of a condominium unit is well-protected in this and other property loss situations because of the corroborative design of the two important policies. Both policies are written for cooperative apartments, as well as condominiums, and these conclusions also are applicable to them.
Ownership of a residential condominium unit involves risks faced solely by the unit-owner as well as risks that are common to all of a group’s membership. Those who arrange insurance for the exposures are advised to be familiar with the special coverage features of the homeowners unit-owners form and, most especially, the coverage options that are available for such property ownership and use. Chief among the options are endorsements for loss assessment coverage and rental of a unit to others. Consideration of both is essential.
Loss assessment coverage is especially important for condominium living and should be discussed and made clear to a unit owner. It applies to the insured's share of a loss assessment arising from perils or claims of a kind within the scope of the policy. Insufficient limits of fire insurance carried on the building by the association are examples of a situation that would give rise to an assessment. Policies issued by most insurers contain a built-in limit of loss assessment coverage under Section I in the amount of (typically) $1,000.
Loss assessment coverage in the amount of (typically) $1,000 is also basically included under Section II in forms used by most insurers. It applies to bodily injury or property damage within the scope of Section II, and also to liability for an act of an association director, officer, or trustee in that capacity.
There is good reason to discuss increasing the basic limit and to urge it in many cases. The business of many associations, especially large ones, is conducted by unit-owner volunteers who are experienced attorneys, accountants, contractors, insurance agents, etc. They keep abreast of property values and conditions and make certain that building and liability insurance is proper and adjusted for the association's needs when necessary. But all condominium unit-owners are not so fortunate.
In any event, when arranging insurance coverage for condominium unit-owners, it is important to discuss the option of increasing the basic limits of loss assessment coverage, and that higher limits be recommended. This is generally accomplished by endorsement for reasonable additional premium. Increase in loss assessment coverage under Section I and Section II from $1,000 to $10,000, for example, carries a $5 additional premium under several policies reviewed. Assessment for earthquake loss, not covered under the foregoing endorsement, is insured by various companies for an additional premium under a separate endorsement.
Ownership of a residential condominium unit involves risks faced solely by the unit-owner as well as risks that are common to all of a group’s membership. Those who arrange insurance for the exposures are advised to be familiar with the special coverage features of the homeowners unit-owners form and, most especially, the coverage options that are available for such property ownership and use. Chief among the options are endorsements for loss assessment coverage and rental of a unit to others. Consideration of both is essential.
Loss assessment coverage is especially important for condominium living and should be discussed and made clear to a unit owner. It applies to the insured's share of a loss assessment arising from perils or claims of a kind within the scope of the policy. Insufficient limits of fire insurance carried on the building by the association are examples of a situation that would give rise to an assessment. Policies issued by most insurers contain a built-in limit of loss assessment coverage under Section I in the amount of (typically) $1,000.
Loss assessment coverage in the amount of (typically) $1,000 is also basically included under Section II in forms used by most insurers. It applies to bodily injury or property damage within the scope of Section II, and also to liability for an act of an association director, officer, or trustee in that capacity.
There is good reason to discuss increasing the basic limit and to urge it in many cases. The business of many associations, especially large ones, is conducted by unit-owner volunteers who are experienced attorneys, accountants, contractors, insurance agents, etc. They keep abreast of property values and conditions and make certain that building and liability insurance is proper and adjusted for the association's needs when necessary. But all condominium unit-owners are not so fortunate.
In any event, when arranging insurance coverage for condominium unit-owners, it is important to discuss the option of increasing the basic limits of loss assessment coverage, and that higher limits be recommended. This is generally accomplished by endorsement for reasonable additional premium. Increase in loss assessment coverage under Section I and Section II from $1,000 to $10,000, for example, carries a $5 additional premium under several policies reviewed. Assessment for earthquake loss, not covered under the foregoing endorsement, is insured by various companies for an additional premium under a separate endorsement.
The importance of the rental coverage option is clear when we note the high percentage of residential condominium units that are "second homes" for eventual retirement living. The purchase of many, particularly in warm-weather and resort areas, is made possible by the income from year-round rental availability, except for the usual two weeks reserved by the owner. In addition to the income generated, the tax deductions for mortgage interest, property tax, maintenance, and depreciation are significant. Unit-owners' rental to others coverage is essential in such cases. But its recommendation is not confined to year-round rental.
The various endorsements optionally available for use with renters package policies to expand and adapt coverage to the specific needs of the insured, including the scheduling of valuable personal property items, also are available for unit owners. A personal property replacement cost endorsement that converts coverage from an actual cash value to a replacement cost basis is of major importance. Flood insurance must not, of course, be overlooked where the risk exists.
The same package policy used for condominium unit-owners is generally issued by insurers to cooperative apartment unit owners because the exposures are similar. Their insurance meshes with that carried by the cooperative corporation, and the described coverage options are applicable.
Tuesday, September 1, 2009
Credit Scoring
A credit score can significantly impact the ability to get insurance and it can also impact the cost of insurance. A credit score is a measurement of credit history in numeric form. Insurance companies use credit scores to help determine eligibility for an insurance policy, the types of coverage available and also to decide how much customers will pay for insurance premiums. Insurance companies do not need applicants' permission to run a credit report.
How Credit Scores Impact Insurance Premiums
Insurance companies have years of studies that show people with problem credit are more likely to file insurance claims. According to the logic used by many insurance companies, people who are likely to file claims should pay more for insurance, get reduced insurance coverage or be denied for insurance.
What to know about a credit score when applying for insurance or trying to reduce an insurance premium:
Based on the national average credit score, a score of 700 or higher is a very good to excellent credit score. Te ability to get insurance and to get the best prices on insurance will not be negatively impacted by a credit history in this range.
A credit score that falls between 650 and 700 is considered to be very good credit. The national average credit score in the U.S. is 692. People in this range should meet insurance companies’ financial criterion and insurance premiums shouldn’t be impacted by the credit report and score.
Credit scores that fall between 600 and 650 are still considered "fair," based on the national average credit score. Though no one knows exactly how each company uses a credit report and score, this credit range probably won’t impact insurance rates or the ability to obtain insurance.
If a credit score is less than 600, there may be a problem either obtaining insurance or getting a competitive rate for insurance premiums due to credit history.
What to Do to Improve a Credit Score
There are things that can be done to improve a credit score. Get these items cleaned up and removed from a credit history and there will be a greater likelihood of getting affordable insurance premiums:
There are things that can be done to improve a credit score. Get these items cleaned up and removed from a credit history and there will be a greater likelihood of getting affordable insurance premiums:
If there are any collections agency reports on a credit report and score, find out if these can be settled with the collections agency for a lesser amount. The collections agency must state in writing that they will remove the negative item from a credit history once they receive payment.
A credit score is negatively impacted by late payments, multiple open lines of credit or advancing past credit limits often. Work to pay more than the minimum amount due on credit cards, close credit cards that aren’t need and stay within limits when using credit cards. All of these things can help improve a credit score and the premiums paid for insurance.
If there is a mistake on a credit report and score, immediately contact the appropriate parties to dispute the issue. Once the item has been removed from the credit report, contact the insurance company to let them know the problem has been resolved. Credit reports and credit scores are updated frequently, so insurance companies can see changes right away.
A credit score can greatly impact the ability to get insurance or the cost of insurance premiums. And if the insurance company runs a credit report upon policy renewal, they may decide to non-renew an insurance policy or raise rates if the credit score hasn’t improved.
How Credit Scores Impact Insurance Premiums
Insurance companies have years of studies that show people with problem credit are more likely to file insurance claims. According to the logic used by many insurance companies, people who are likely to file claims should pay more for insurance, get reduced insurance coverage or be denied for insurance.
What to know about a credit score when applying for insurance or trying to reduce an insurance premium:
Based on the national average credit score, a score of 700 or higher is a very good to excellent credit score. Te ability to get insurance and to get the best prices on insurance will not be negatively impacted by a credit history in this range.
A credit score that falls between 650 and 700 is considered to be very good credit. The national average credit score in the U.S. is 692. People in this range should meet insurance companies’ financial criterion and insurance premiums shouldn’t be impacted by the credit report and score.
Credit scores that fall between 600 and 650 are still considered "fair," based on the national average credit score. Though no one knows exactly how each company uses a credit report and score, this credit range probably won’t impact insurance rates or the ability to obtain insurance.
If a credit score is less than 600, there may be a problem either obtaining insurance or getting a competitive rate for insurance premiums due to credit history.
What to Do to Improve a Credit Score
There are things that can be done to improve a credit score. Get these items cleaned up and removed from a credit history and there will be a greater likelihood of getting affordable insurance premiums:
There are things that can be done to improve a credit score. Get these items cleaned up and removed from a credit history and there will be a greater likelihood of getting affordable insurance premiums:
If there are any collections agency reports on a credit report and score, find out if these can be settled with the collections agency for a lesser amount. The collections agency must state in writing that they will remove the negative item from a credit history once they receive payment.
A credit score is negatively impacted by late payments, multiple open lines of credit or advancing past credit limits often. Work to pay more than the minimum amount due on credit cards, close credit cards that aren’t need and stay within limits when using credit cards. All of these things can help improve a credit score and the premiums paid for insurance.
If there is a mistake on a credit report and score, immediately contact the appropriate parties to dispute the issue. Once the item has been removed from the credit report, contact the insurance company to let them know the problem has been resolved. Credit reports and credit scores are updated frequently, so insurance companies can see changes right away.
A credit score can greatly impact the ability to get insurance or the cost of insurance premiums. And if the insurance company runs a credit report upon policy renewal, they may decide to non-renew an insurance policy or raise rates if the credit score hasn’t improved.
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