Though not legally required, most condominium instruments provide that the association must carry hazard and liability insurance in order to protect the membership from disaster and the financial strain of litigation. The instruments may also specify the amount of the deductibles that the association’s various types of coverage will have; if not, the deductibles may be set by the board of directors.
The most common condominium insurance question I hear is what, exactly, should the association’s master casualty policy cover? There are three approaches to master casualty coverage. The most comprehensive type covers all condominium improvements – common elements, units, and all fixtures and finishes within the units, even if upgraded by the owners. The second type of coverage insures all condominium improvements – both common elements and the units, but the units are insured only to a certain level and will not cover upgrades made by the owner. The third approach to master hazard coverage is to insure only the common elements.