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Individual insurance on townhouse vs HOA having a blanket policy
Old 05-27-2020, 08:08 AM   #1
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Individual insurance on townhouse vs HOA having a blanket policy

IME, in townhouse developments, the HOA has a big blanket policy on the buildings. If a fire burns down a row of 5 townhouses, one policy covers loss. Blanket policies tend to be much cheaper than say 100 plus individual policies. And each owner then has something similar to a renters policy on contents and personal liability.

I was reading insurance policies and HOA covenants and restrictions for someone. Their HOA requires each owner to have their own building coverage. The agents says this is standard and that mortgage companies do a good job at making sure the coverage remains in force and is adequate. She claims that in the event of a loss, the mortgage company will not just be paid off. That the proceeds will be used to rebuild.

Questions:1) Does anyone else see this scenario as odd? More difficult to manage? 2) Does anyone have any experience with what happens in a multi-unit loss with individual coverage?
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Old 05-27-2020, 09:39 AM   #2
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Perhaps it is different from townhomes but our condo association insures the building as they are responsible for the exterior walls, roof and common walls between units. They are responsible for the drywall. I'm guessing that in the event of a total loss that they would also be responsible for exterior doors and windows even though they are not responsible for those in the normal course.

We are responsible for paint on the inside of the exterior walls and all interior walls, electrical distribution beyond the panel, interior plumbing, etc. and that is what our condo policies cover.

We don't have a mortgage so I can't help you on that part, but the mortgage company isn't entitled to get paid off if your home burns if you decide to rebuild so I'm not sure why they would be entitled to be paid off if your townhome burned and the association decided to rebuild.... however, you would still be responsible for making your mortgage payments during the rebuild.
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Old 05-27-2020, 11:45 AM   #3
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I have experience with this. I would favor one blanket policy for the entire association to cover the structure (be sure to include liability insurance for the board members). This way if a hail storm comes along you don't have 5 different companies determining the amount of damage. You don't rely on your neighbor to actually fix their repairs if they decide to just cash it out. You don't have to match siding and other headaches. There is just one policy deductible instead of each member having their own.




Not everyone has a mortgage and some choose to self insure (not many) Others let their policy lapse and you could have an uninsured unit in the middle that doesn't get fixed.....


Most condo policys (form 6) come with some coverage for your responsibility for the structure & interior improvements, this usually isn't enough and can be increased.


You can also get insurance on your own to cover assessments made by the association. A good idea too.
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Old 05-27-2020, 12:30 PM   #4
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Many townhomes are owned fee simple and the owners are responsible for the upkeep and maintenance of the entire unit including the exterior. In that circumstance, the HOA has no ownership interest in the unit to insure and I am not sure if a company could or even would issue insurance in their name. In addition, that would take the owner completely out of the negotiation with the insurance company. If the townhome is owned condo style and the association would be responsible for, for instance, the exterior of the unit, I could see a policy by the HOA. I wouldn't be interested in saving money if it meant that I gave up the rights to directly engage with the insurance company in the event of a significant claim.
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Old 05-27-2020, 12:31 PM   #5
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Originally Posted by Z3Dreamer View Post
IME, in townhouse developments, the HOA has a big blanket policy on the buildings. If a fire burns down a row of 5 townhouses, one policy covers loss. Blanket policies tend to be much cheaper than say 100 plus individual policies. And each owner then has something similar to a renters policy on contents and personal liability.

I was reading insurance policies and HOA covenants and restrictions for someone. Their HOA requires each owner to have their own building coverage. The agents says this is standard and that mortgage companies do a good job at making sure the coverage remains in force and is adequate. She claims that in the event of a loss, the mortgage company will not just be paid off. That the proceeds will be used to rebuild.

Questions:1) Does anyone else see this scenario as odd? More difficult to manage? 2) Does anyone have any experience with what happens in a multi-unit loss with individual coverage?
Is this really for a townhome community with shared walls? I don't see how you can have building insurance if you don't actually own the entire building. Wouldn't that mean that if a car hits and damages the unit on the end, that owner could file a claim against all the rest of the policies that cover any part of the same building? If the community is really free-standing single-family homes, then even if they're placed close together I think it would make sense to have separate policies for them.

As the treasurer of our HOA, which is 4 units that are really two duplexes, I scan and email the declarations page from our association's insurance policy to the other owners every year when it renews. The individual owners provide that to their mortgage holders if necessary, and as far as I know, nobody has additional insurance for the building they live in, just their internal decor and possessions. When our mortgage was acquired by ABN-AMRO, they wanted to see evidence of insurance every year, but they always accepted the HOA's policy and didn't demand that we carry any additional coverage. Wells Fargo and Citi also owned our mortgage at different times, and I think they each wanted proof of insurance the first year, but not again after that.
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Old 05-27-2020, 12:35 PM   #6
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Many townhomes are owned fee simple and the owners are responsible for the upkeep and maintenance of the entire unit including the exterior. In that circumstance, the HOA has no ownership interest in the unit to insure and I am not sure if a company could or even would issue insurance in their name. In addition, that would take the owner completely out of the negotiation with the insurance company. If the townhome is owned condo style and the association would be responsible for, for instance, the exterior of the unit, I could see a policy by the HOA. I wouldn't be interested in saving money if it meant that I gave up the rights to directly engage with the insurance company in the event of a significant claim.
In this style of ownership, which owner's insurance company pays if there's something like a roof leak that leads to water damage in a shared wall between two units?
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Old 05-27-2020, 12:48 PM   #7
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The design for most of our buildings includes a firewall that extends above the roof so highly unlikely a leak on one side will impact the other side. However, in the event of a claim/dispute between adjacent owners, the declaration spells out a method for resolution. In any event, you make a claim on your insurance and they have the option to go after the neighbor. Works pretty much just like a car accident where you get the runaround from the other guy. I am aware of two building that have a common roof over 3 or 4 units above the firewall. However, in 30 years, we have not seen a leak that could be traced back to an adjacent unit. Probably will happen some day just as that building will have issues when one owner wants to replace the roof over their unit and the neighbor does not wish to do so. Even in those units, the firewall extends up to just under the roof.
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Old 05-27-2020, 02:09 PM   #8
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We have been covered both ways in our current town home. Most buildings are 4 units with shared walls.

When we first moved in, insurance was covered as described by OP, except homeowners were required to have the HOA named as additional insured. I think this is the important part that might be missing from the OP's example. We have not had a mortgage here, so not sure how that plays into it.

A few years ago, the HOA was having a hard time get verification of additional insured status, so they went to a blanket policy. With the blanket policy, the HOA policy covers "from the studs in" we have a separate policy for the finish work and contents. When the change was made, our assessments went up, but our insurance went down. It was pretty much a wash.

FWIW, the blanket policy also has a 15% deductible for earthquake damage (we are in the New Madrid fault area). Owners were encouraged to add a rider to their own policy to cover a special assessment if this should happen. We did not, we can afford to self insure for 15% (though, I am told the cost is not unreasonable)
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Old 05-28-2020, 11:33 AM   #9
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You don't say what the basics are. In the covenants you are looking at is the name of the community followed by a phrase, like 'a condominium?' If not, is it a zero lot line community or?

The issue is what is required for insurance depends on state law for the type of community. Any other experience in any other state, isn't comparable.
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Old 05-28-2020, 12:37 PM   #10
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You don't say what the basics are. In the covenants you are looking at is the name of the community followed by a phrase, like 'a condominium?' If not, is it a zero lot line community or?

The issue is what is required for insurance depends on state law for the type of community. Any other experience in any other state, isn't comparable.
Fee simple townhouse. Not a condominium. This would be in the great state of Maryland.

"Zero lot line" typically refers to a house built on the property line, such as in a densely packed urban environment. This is a townhouse development where they share walls.
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Old 05-28-2020, 01:09 PM   #11
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IME, in townhouse developments, the HOA has a big blanket policy on the buildings. If a fire burns down a row of 5 townhouses, one policy covers loss. Blanket policies tend to be much cheaper than say 100 plus individual policies. And each owner then has something similar to a renters policy on contents and personal liability.

I was reading insurance policies and HOA covenants and restrictions for someone. Their HOA requires each owner to have their own building coverage. The agents says this is standard and that mortgage companies do a good job at making sure the coverage remains in force and is adequate. She claims that in the event of a loss, the mortgage company will not just be paid off. That the proceeds will be used to rebuild.

Questions:1) Does anyone else see this scenario as odd? More difficult to manage? 2) Does anyone have any experience with what happens in a multi-unit loss with individual coverage?

This is how mine is insured. Fee Simple Townhouse in FL. HOA insures the buildings and is responsible for the structure maintenance except for windows. I have a condo policy for everything studs in. Hopefully, no chance to see how the claims would work. 46 and never had an insurable loss (certainly not one I would bother making a claim for)
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Old 05-29-2020, 11:34 AM   #12
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Fee simple townhouse. Not a condominium. This would be in the great state of Maryland.

"Zero lot line" typically refers to a house built on the property line, such as in a densely packed urban environment. This is a townhouse development where they share walls.
Thanks, and where I live (Washington state), some communities with shared walls are defined as zero lot line. The HOA is responsible for shared services (i.e. streets, sidewalks, maintaining landscaping parking strips, etc.), but owners of specific units in a building are responsible for all repairs of the outside of the building, and all maintenance of front lawns and improvements in backyards if provided to a unit. From the outside it looks like a townhouse condominium, but there is no common ownership except for streets/sidewalks.

So, again, I think it depends on what Maryland's real estate laws say about insurance coverage and whether a HOA has a responsibility to insure buildings with common walls. There has to be something written on this subject for an insurance agent to comment that it is an accepted norm for covering the buildings. Wasn't that your initial question - is it common to see this type of arrangement?

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Old 05-29-2020, 12:04 PM   #13
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Thanks, and where I live (Washington state), some communities with shared walls are defined as zero lot line. The HOA is responsible for shared services (i.e. streets, sidewalks, maintaining landscaping parking strips, etc.), but owners of specific units in a building are responsible for all repairs of the outside of the building, and all maintenance of front lawns and improvements in backyards if provided to a unit. From the outside it looks like a townhouse condominium, but there is no common ownership except for streets/sidewalks.

So, again, I think it depends on what Maryland's real estate laws say about insurance coverage and whether a HOA has a responsibility to insure buildings with common walls. There has to be something written on this subject for an insurance agent to comment that it is an accepted norm for covering the buildings. Wasn't that your initial question - is it common to see this type of arrangement?

- Rita
Now that I think about it, the agent's response was more like a "deer in the headlight" kind of response. She had not heard of the other way of doing it. She had also not considered whether the HOA should have an umbrella policy. She didn't understand why you would have that.

So my question was to give me a reality check. Or was I the only one in the world to have ever heard of having a blanket covering all properties?

And, I am the only one who thinks that in today's litigious world that an umbrella is a good thing?
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