Insurance news and information

Flickr photo credit: aprilzosia

Even if your condominium or apartment complex is located outside California, you’re still facing an earthquake risk. That’s because all 50 states to date have been hit with earthquakes, and 39 states have suffered losses, according to the California Earthquake Authority. More than 5,000 earthquakes hit every year, and losses can be devastating. The San Francisco earthquake in 1906 caused $235 million in damages (an amount equal to $5.1 billion today).

So who insures the risk in the condo association world? Are condo associations responsible, or do unit owners bear the burden of insuring against earthquake damage?

In some cases, condo association insurance for earthquake damage is no longer available. Thanks to historic losses that proved unequivocally that insurers were under-pricing earthquake losses, many carriers opted to exclude homeowners associations from their list of buyers. That puts the onus of coverage onto the unit owners, who may not be aware of the association’s lack of coverage. If your condo association is one that is prohibited from purchasing coverage, let your home owners know. Inform them of the insurer’s lack of coverage availability, but also let them know what their options for their units and personal belongings are. Owners are able to purchases up to $50,000 in earthquake loss insurance and an additional $25,000 in personal property coverage.

Consider, though the risks of not having coverage. If your association is able to purchase it and you decline, your board could be sued for “failure to adequately insure” the premises. Also, the costs of not insuring could be exponentially higher than the costs of coverage. And if your association drops coverage one year, then attempts to buy it in another year, it could be difficult to find thanks to availability of policies.

Check with your broker or your insurer to see if your association can purchase earthquake insurance. Whatever the outcome, communicate your coverage or lack of coverage with your unit owners and residents.