This raises additional concerns about asbestos and lead-based paint. Apartment buildings also present specific liability exposures. Because more than one family lives in close proximity in these structures, smoke detectors, sprinklers, fire extinguishers and firewalls are especially important. Insurance companies may have coverage conditions requiring that the dwellings have a specific number of smoke detectors and fire hydrants.
They also may call for certain sizes and types of fire hydrants to be in the buildings. Further, they may go so far as to state that the property-owners must check and maintain these fire-safety devices on a regular basis, or the insurers will void the coverage. This can add additional expenses for which your clients may not be prepared. This affects the financial bottom line. Insurance companies also want to ensure that if one unit were to catch fire, it is possible to extinguish the fire.
They want to know that there are mechanisms in place so that other tenants can be warned, and that the other units have maximum protection against damage. Additional liability concerns include public-meeting areas such as playgrounds, clubhouses and building entrances. In fact, structures with a single entrance create more liability exposure than those with separate entrances.
In some cases, multifamily buildings with single entrances and public areas can create a larger than acceptable liability exposure for the insurance company. This can result in your borrowers not getting coverage. Multifamily properties have significant underwriting requirements. This means it takes longer for the agent to conduct the quoting process and to get the binder together.
Thus, mortgage brokers working on a multifamily deal should not call their property-insurance agent right before closing to request an insurance binder for the property. Most important, not all agents can or want to insure multifamily buildings in the first place. So when your clients seek to purchase a multifamily dwelling, find out upfront if the insurance agents you do business with will even consider insuring them. If they do, then you should give at least three days notice to your insurance agents to get all the information necessary, get a quote and give you an insurance binder.
To help speed up the process, send a copy of the appraisal and the inspection report to the insurance agent to review. Lenders will generally require that multifamily properties be covered for the loan amount and that they have replacement-cost coverage, loss-of-rent coverage and in some cases, liability coverage.
When it comes to the loss of rent, the coverage must be added separately. This means that the insurance company will want your clients to explain how much rent will be charged for each unit and how many months in coverage they want.
Lenders will generally want at least six months in rent-loss coverage. Because multifamily buildings can take longer to rebuild, however, your insurance agent may suggest that the borrowers obtain 12 months in rent-loss coverage instead.
Liability coverage under a commercial policy can be either set up as a package or as a separate policy. Again, multifamily properties that are rental properties present certain financial exposure to insurance companies. Because liability claims can lead to lawsuits, it is important to evaluate the amount of coverage you need to protect yourself financially.
For complete protection, many people purchase umbrella liability policies. An umbrella policy provides liability protection that will exceed what your condo and auto policies will cover. Condo insurance costs vary. For example, someone with a number of valuables, such as jewelry, fine art, antiques or collectibles, will need to add additional coverage for those items. Condo insurance as a rule, like homeowners insurance, cannot be deducted on your taxes.
However, if you rent the condo out to another person, you may be able to deduct the cost of your condo or landlord insurance, at least as it applies to depreciation, wear and tear. Also, if you operate a business out of your condo, you can typically deduct a portion of your condominium insurance from your taxes. Although there are several ways to buy insurance for your condo, your best bet is to work with an independent agent.
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A local Trusted Choice member agent in your area can compare condo insurance rates from multiple insurance carriers and help you choose the best policy for your needs. Additionally, your agent will be able to provide consultation on various options and available discounts. For example, you may be able to bundle your auto and condo insurance for a multi-policy discount. Your condominium insurance will cover theft or burglary if your policy includes personal property coverage. Depending on the details of your policy, you may even be covered for items that are stolen from your car. However, you should be aware that certain items may be either excluded or have specified limits, and you may require additional riders or endorsements to get full coverage on such things as jewelry, art, collectibles and other valuable items.
You can compare rates through an independent agent.
To ensure that all of your items are covered against theft or damage, you may want to take a full inventory of your personal possessions and estimate their value. Many condo owners are surprised to find out how much they have that is worth protecting. Be sure to compare the amount of coverage you have with your inventory to determine whether you have enough insurance. By taking an inventory of your items you also can create a record of what you own, so that in the event of a loss you are well prepared to file a claim.
If you have condo insurance, you will be covered for damage to your possessions and the interior of your condo from major storms such as hurricanes, tornadoes and windstorms. It is always important to understand the coverage your condo association carries so that you avoid coverage gaps. Basic condo insurance does not typically cover special assessments.
Depending on the specifics of your condo insurance policy, you may have some coverage that would help you cover your portion of the assessment. Most home and condo insurance companies specifically exclude mold from their policies. However, you still may be able to successfully file a claim with your condo insurance company under certain circumstances.
When you return, you find water and mold everywhere.
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If the mold was due to a flood, it would not be covered. Flood insurance is a separate policy that you must have in place to receive compensation for flooding damages. Yes, appliances are typically covered under your condo insurance policy. Be sure to review the specifics of your policy and the limits on appliance coverage, and update it as needed.