Association Insurance and the HO6 Policy

Owning a condominium in Hawaii can be a significant milestone for many individuals or families, so it is equally important to protect this asset moving forward.  As a homeowner, this starts by having a clear understanding of the two different insurance policies involved in protecting the condo unit – the Master Insurance Policy for the building provided by the Home Owners Association (HOA) and the HO6 Condo Policy secured by each condo owner for their individual unit.

Let’s start by looking at the structural protection for your condo unit from the outside-in.  The Master Policy provided by the Association protects the overall building and all condo units within it.  The cost for this policy is shared by each condo unit owner as a part of your Association dues.  This policy essentially covers the blank canvas of your condo as it was originally constructed from the exterior framing to the interior features of the home including the drywalls, flooring, and fixtures.  Following a covered loss, (ie fire, water leak/burst) a condo unit owner will utilize this Master Policy as the initial coverage to repair damages to the original structure of your home.  As a part of this process the Master Policy has a deductible that may be assessed to the affected unit owner(s) and there are two key aspects of this Master Policy deductible to be considered:

#1- What is the amount of the Master Policy deductible for your Association?  This amount ranges from $5,000 all the way up to $250,000.  The Master policy deductible for your Association at West Maui Trades is currently $100,000.  Considering you may be assessed this deductible amount in a loss, it is critical to know you have sufficient coverage from your individual HO6 Policy so you are not left paying any out of pocket expense for this amount.

#2- How will your HO6 Condo Policy cover this Master deductible amount?  Knowing your Association has a $100,000 Master Policy deductible, the next step is to understand how your HO6 Policy will cover that on your behalf. There is no uniformity as to how various insurance carriers will respond to the Master Policy deductible from the HO6 Policy as some carriers will cover this amount from:

• Loss Assessment
• Dwelling Coverage
• Personal Liability

Once you determine how HO6 Policy coverage will respond, confirm that area of your HO6 policy is at least equal to or greater than the $100,000 Master Policy deductible for your location.

Beyond covering the Master Policy deductible, your HO6 policy also provides structural coverage for the condo unit by picking up where the Master Policy leaves off.  While the Master policy covers the original construction of the home, the HO6 Policy will cover structural improvements or upgrades done to the flooring, countertops, and fixtures of your condo.

For example, if your condo was originally built with carpeting throughout and has since been renovated with wood laminate flooring, the HO6 Policy can provide coverage to repair the upgraded wood laminate following a covered loss.  With this in mind, you will want to have estimated value of improvements/renovations done to your home by yourself or a prior owner in order to appropriately determine the Dwelling coverage needed on your HO6 policy.  

If you have any questions regarding this or would like an analysis of your current Condo Insurance policy, please feel free to contact us at Atlas Insurance at infohawaii@atlasinsurance.com