Condo Insurance Policy Changes by FNMA

New rules for condo’s and townhomes are now being enforced on all new federally insured loans and refi’s. Every unit owner must now have a unit owners insurance policy, commonly called condo-homeowners policy or HO6 which covers the things not covered by the Homeowners Association’s policy.

The unit holders policy must now include ‘walls in’ or building coverage of at least 20% of the appraised value. This usually covers the interior walls, wall and floor treatments, cabinets and fixtures. Each association is different and the unit owners and HOA responsibilities are spelled out in the CCR’s and/or By laws.

In the past the decision to insure and set the limits for  unit owners building coverage were left up to the unit owner. Sometimes building coverage was left off or inadequate either on purpose to save money or out of agent or client ignorance. This is one of the most common errors we see when reviewing client policies written by competing agents.

A few years ago a pennywise client refused the coverage and had a $125,000 uninsured loss due to a fire on a rental condo. We would have refused to insure him but alas he was the father of one of our agents. We want to be in the claim check delivery business not the ‘ I told you so business’. Don’t let this be you.