Category: Homeowners

What Do I Own As a Condo Unit Owner?

Posted on by steve hom

The term “condominium” in real estate law refers to a large complex that is divided into individual units and sold. When a purchaser buys one of the units in the complex, they enter into a dual ownership situation. The first type of ownership is the acquisition of individual and absolute title to the particular space their unit occupies. That means that they own the area formed by the walls, floor and ceiling of their unit and everything inside including interior partitions, cabinets, appliances and fixtures. They technically do not own the land. However, their ownership of their individual unit is as complete and absolute as a homeowner’s ownership of the house that they buy. They have title to their unit just as they would if they had purchased a single-family home. Additionally, they have the same legal status as a single-family homeowner.

A title search is performed when someone purchases a condominium, just as it is when someone buys a house. This search will disclose any problems with the title of the unit along with any liens against the condominium building or the complex itself. Once the title search is complete and there are no problems, the purchaser receives a deed to their unit.

Because ownership is in the individual unit, the purchaser needs to be sure that the location of his/her unit is precisely and accurately described in terms of space. The physical boundaries of the unit must be pinpointed with the same accuracy that locates a piece of land and distinguishes it from all other pieces of land.

This description is arrived at by dividing, measuring and locating the unit in three-dimensional terms so that it cannot be confused with any other unit space. The legal ramifications of this description are significant. The description safeguards the purchaser from involvement in the interests or obligations of owners of other units in the condominium. The description is also fundamental in obtaining a mortgage and disposing of the unit through sale or by bequeath.

The second type of ownership is an undivided interest in all of the common parts of the property, such as the main walls, roofs, halls, lobbies, stairways as well as the land. This ownership is held collectively with all other unit owners in the condominium. The condominium management controls these common properties. Management is usually made up of a board of unit owners who manage the day- today operations of the complex like garbage collection, landscaping and snow removal.

Because of the shared ownership of common areas, the unit owner has to abide by the legal documents, which govern the association. These documents are known as the Declaration and the By-laws. The Declaration delineates the percentage interest that each unit has in the association. That percentage determines the unit owner’s voting rights and payment obligations.

The By-laws spell out board member qualifications, how the board administers policies and how it oversees the maintenance and administration of the association. The by-laws will also include the rules about meetings, voting, proxies, budget, assessments, insurance coverage, and restrictions on the use of the units and the common areas.

Remaining Under the Radar with Your Homeowner’s Coverage

Posted on by steve hom

If you contact your insurance company to verify coverage for a particular claim, it goes on your record.  Even if you call your agent directly, they might be obligated to inform the insurer of your inquiry.  Too many inquiries, even if you never file a claim, can jeopardize your policy.  Too many claims, regardless of their size, can result in non-renewal at the end of your policy’s term.

Here are several ways to stay under the radar with your insurance company:

  • Don’t file for small claims.  When property damage occurs, get estimates first before calling your insurer or agent.  Pay for small repairs yourself, if possible.
  • Consolidate coverage.  Have your homeowner’s and auto insurance with the same company.  The insurer might think twice about canceling if you’re likely to pull the other coverage and move elsewhere.
  • Increase your deductible.  If you heed the earlier advice and don’t intend to file for small claims, save the money you’re spending on a policy with a $250 deductible and raise it to $500 or even $1000.
  • Insure your home for its replacement cost, instead of the balance of the mortgage, and save money.  Approximately 25 percent of your mortgage represents the cost of the land.  If your home burns to the ground, you’ll still have the land.
  • Stay with the same insurer indefinitely.  You’ll build up a track record, and your insurer might refrain from canceling your policy if you do have a claim. 
  • If you purchase a house, check into a homeowner’s policy before your closing date.  Thanks to the Comprehensive Loss Underwriting Exchange (CLUE), there is a database of insurance claims that inform an insurer if a particular house has ever been subject to a claim.  If previous claims were paid on the house, you’ll have a hard time obtaining coverage, even if you’ve personally never filed a claim.  Furthermore, any insurance you’ll find will be more expensive than standard rates.

At the same time, if you’ve filed claims before and purchase a new home, you could be denied a policy, not because of the house, but because of your own claims history. 

Call your state’s insurance commission to ask about state regulations concerning non-renewal or cancellation.  A few states have laws that prevent an insurer from refusing to renew your policy for claims caused by acts of nature.

Bearing the Risks of Condo Ownership

Posted on by steve hom

Living in a condo can be risky business if you fail to discover where you are vulnerable so that you can remove or at least lessen your liability.  As always, any liability assessment starts with the condo association’s master policy.

There are four basic types of risks that associations must protect themselves against. The first is property loss, which means physical property as well as intellectual property such as legalities of the association’s operations. The second is liability resulting from a person or legal entity filing a claim against the association. The third is any unplanned loss of revenue or increase in expenses in an accounting period, and the fourth is losses resulting from the inability of an association employee or board member to continue in their current capacity.

In order to manage the risk associated with these losses, condo associations generally have master policies that include:

  • General Liability – for claims of bodily injury or property damage
  • Workers’ Compensation and Employer’s Liability – coverage of employees against injury while they are working
  • Directors & Officers – to cover claims of negligence or malfeasance by association leaders
  • Fidelity Bond – for claims of misappropriation of association funds

These policies can be written separately, but they usually are combined into one umbrella policy.

As a unit owner, you need a personal policy to cover personal property. Your policy is typically written on Form HO-6. The liability coverage on Form HO-6 is similar to other homeowner’s policies, but the property coverage is not.

Form HO-6 covers your personal property, as well as improvements, additions, and private ownership spaces such as balconies, private entranceways and private garages. However, the policy only covers physical damage to property if it is caused by a named peril that is specified in the policy. Named perils are standard and include events such as fire, lightning, storm, explosion, riot, aircraft, smoke, vandalism, theft, and broken glass.

Your personal property is not covered for damage resulting from perils listed in the exclusions section of your policy. These usually include damage that occurs from enforcement of building codes, earthquakes, floods, power failures, neglect, war, nuclear hazard or intentional acts of destruction.

As the condo unit owner you also have to be vigilant about property loss in the master policy coverage.  In general, a condo association’s master insurance policy will require you to share a part of the loss if the building is damaged by fire, lightning, vandalism or the weight of ice or snow. Remember, as the common owner of shared spaces, you assume the liability connected with damage to those shared spaces. Your personal insurance coverage will provide you some relief from this debt, but be advised that you may want to consider augmenting it. That’s because a policy written on Form HO-6 entitles you to collect up to $1,000 for loss assessments charged to you by the condo association. Be aware that Form HO-6 has a unique feature in this regard. When a loss is covered by both the condominium’s master insurance policy and your individual policy, your homeowner’s insurance will only pay for the balance of the loss that remains after the master insurance policy pays 100 percent of its limit.

Understanding the features of your personal coverage as well as the master policy will help you know your rights and responsibilities in the event it becomes necessary to collect on your coverage.

Is the Aluminum Wiring in Your Home a Problem Waiting to Happen?

Posted on by steve hom

Any electrician will tell you that copper wiring should always be used for the electricity in your home. But copper is expensive and that can be a hindrance, in some instances more than others. In the mid 1960s to the early 70s copper was far too expensive to be used in homes and was replaced by aluminum as the preferred material.

Aluminum wiring that was installed during this time period is called “old technology” wiring. Such wiring has properties that make it a potential fire hazard. When subject to stress over a period of time, aluminum wiring will deform more rapidly than copper. Likewise, prolonged exposure to heat will make aluminum expand far more quickly than copper. Aluminum wire is extremely brittle and is subject to corrosion from oxidation. This corrosion interferes with its ability to properly conduct electricity.

If you suspect your home has aluminum wiring, there are certain waning signs to look for that indicate you may have the potential for a fire:

·   Face plates on outlets or switches are warm to the touch

·   Lights that continually flicker when they are on

·   Circuits that don’t work properly

·   Smelling burning plastic when you are near outlets or switches

Unfortunately, not all failing aluminum wired connections issue warning signals. Some aluminum wired connections have been known to fail without any prior indication of trouble.

What methods of remediation are available to homeowners that will prevent a tragedy from happening? One way is to eliminate the aluminum wire itself.  Depending upon the style in which your house was built and the number of basements and attics you have, it may be possible to rewire your home. An electrician would install a copper wire branch circuit system, which would essentially eliminate the function of the existing aluminum wire inside the walls. This is expensive, but it is the most effective solution to the problem.

A less expensive alternative is the crimp connector repair. This involves attaching a piece of copper wire to the existing aluminum wire branch circuit with a specially designed metal sleeve. The metal sleeve is called a COPALUM parallel splice connector. This special connector can only be installed with the AMP tool that was developed for this purpose. The AMP makes a permanent connection. The repair is completed with the addition of an insulating sleeve around the crimp connector.

There are two other repair methods that are significantly less expensive than COPALUM crimp connectors, however, neither of these repairs is considered as safe. The first of these, called “pig tailing”, involves attaching a short piece of copper wire to the aluminum wire with a twist-on connector. The copper wire is connected to the switch or wall outlet. These connectors have proven to overheat over time.

The second repair uses switches and outlets labeled “CO/ALR”. These devices perform better with aluminum wire when properly installed than the types of switches and outlets usually used in the old technology aluminum branch circuit wiring.  However, CO/ALR connectors are not available for all parts of the wiring system. These wiring devices are also not fail proof.

Protecting Your Condo Against Floods

Posted on by steve hom

Flood insurance is a horse of a different color when it comes to the types of coverage available because it must be obtained through the Federal Emergency Management Agency (FEMA). Under the National Flood Insurance Program (NFIP), there are flood insurance guidelines and policies for both the condo association and the individual unit owner.

The condominium association is responsible for maintaining all forms of property insurance necessary to protect the common property against hazards to which that property is exposed. If the condominium is located in a Special Flood Hazard Area as designated by the federal government, it is the responsibility of the condo association to provide adequate flood insurance protection for all common property.

The Residential Condominium Building Association Policy (RCBAP) Form is designed for buildings owned by condominium associations that have at least 75% residential occupancy and are located in communities covered under the flood insurance program. High-rise and low-rise residential condominium buildings can be insured under the RCBAP. The program enables the association to manage flood insurance needs according to their insurance requirements. Under the RCBAP, the entire building is covered, including the common areas, individually owned building elements within the units, and commonly owned personal property if the policy is written with contents coverage.

The RCBAP is a replacement cost policy. This means that no depreciation deduction is taken at a loss settlement. The maximum available limit is $250,000 per unit times the number of units. Buildings that are not insured for at least 80% of their replacement cost or the maximum amount of insurance available for that building under the NFIP would be subject to a co-insurance penalty at settlement.

Since the association’s coverage of building elements within their unit would be primary, and the unit owner’s personal coverage considered excess coverage, unit owners should obtain information about the by-laws and building coverages provided by the association.

In addition to building elements, unit owners should cover their personal property as well as structural improvements they have made. The policy that addresses the insurable needs of residential unit owners is the Dwelling Policy Form. This form can cover building elements within units, improvements made by unit owners, flood loss assessments and personal property owned by the unit owner or it can simply cover the unit owner’s personal property depending upon how the policy is written. It may not, however, be used to cover the cost of co-insurance or deductibles. An individual unit’s coverage cannot exceed the $250,000 building policy limit for single-family dwellings in program communities, or the $35,000 building coverage limit in emergency program communities.

There are options for covering improvements within units made by the unit owners. If the unit owner purchases contents coverage under the Dwelling Policy Form, coverage is also available for the interior walls, floor and ceiling, if not otherwise covered under the condo association’s flood insurance policy. The coverage limit is 10% of the amount of the contents coverage. If a unit owner uses the contents coverage to insure improvements, it reduces the personal property limit.

If you need assistance in finding flood insurance coverage for your condo, please give us a call.

Insuring Your Collectibles the Smart Way

Posted on by steve hom

If you have spent considerable time and money on a collection you probably want to ensure that it is well protected.  Homeowner’s insurance does not necessarily cover large collections and it is best to find out whether you are covered before an incident of loss, rather than after.  Most homeowner’s policies cover items such as jewelry, stamps or antiques, and value them between $500 and $2,000.  Generally, if your collection is worth more than $3,000 it is a good idea to purchase separate insurance.  Talk to your insurance provider to find out the cost of a specialized policy or ‘floater’ for your collection.  Compare this cost to that of a specialty insurer.

A specialty insurer focuses on fine collectibles and will help you determine what type of insurance is best for you.  Also, specialty insurers may charge less than most homeowner’s insurance rates.  A specialty insurer will also provide more extensive coverage for your collection, such as coverage while in transit, accidental breakage, shipping loss and fumigation from fire damage.

It is important to know what documentation is needed and when it will be required.  Some policies require documentation of the collection at the time of coverage, yet others may only want documentation in case of a claim.  The documentation requirement may be a listing of the items along with pictures, while some companies will accept a videotaped account or may require receipts of purchase.  Specialty insurers generally require an appraisal of your collection.  In some cases, you may underestimate the value of your items, so it is best to consult a qualified appraiser who can assist you in determining and documenting the value for insurance purposes.

Insurance premiums may be less if there is minimal chance of loss.  For example, if you have a valuable collection stored in your home, it might be prudent to install an alarm system.

If you own a valuable collection, make the decision to insure it and allow it to be enjoyed for generations to come.

It’s My Condominium, Do I Need Coverage?

Posted on by steve hom

Owning a condominium is a cross between being a homeowner and being a renter.  The unit you purchased belongs to you, but you are still subject to the by-laws of the association that runs the entire complex.  That puts you smack dab in the middle when it comes to insurance coverage.

Generally speaking, the condo association will have a master insurance policy that covers general liability for the physical structure and physical damage to the common areas that you share with all of the other unit owners.  Keep in mind that while you are covered under the master policy, it is only for these specific instances.  It is important that you determine which structural parts of your condo are covered by the association’s master policy and which are not.

You also need your own coverage to protect you in the event you lose your possessions.  You may also want to obtain coverage for third party injury liability within your unit, property damage to another unit that is caused by you, the loss of structural improvements that you have made to the unit, and additional living expenses that result from having to move out of your unit temporarily.

When you purchase individual coverage, keep in mind that premiums, types of coverage, and limits are affected by factors such as your geographic region and credit score.  Talk to your insurance agent about what discounts the company offers for such items as installing smoke detectors and dead bolt locks, purchasing insurance for both your condo and your car with same company, and maintaining your home as a non-smoking environment.  Also, if you want to lower your annual premium, you may consider raising your deductible; however, if you choose a higher deductible, you will pay for smaller claims out-of-pocket.  Handling smaller claims yourself is a good practice under any circumstances because too many small claims can raise your rates significantly.

Make sure your personal policy includes liability coverage even though you are covered under the general liability coverage in the master policy.  You need liability coverage to protect yourself in the event of accidents to guests that occur within the confines of your dwelling.  You could also be liable if an action of yours inadvertently causes damage to the physical structure or to common areas.  The condo association may have insurance coverage, but if you were negligent, they can and will seek redress from you.

When you are reviewing the actual coverage, keep in mind two important considerations.  When given the option of replacement coverage or actual cash value coverage, choose the former.  Cash value is cheaper, but you will pay for that savings down the road if something happens to your possessions.  Actual cash value policies reimburse you for what you paid for the items, minus depreciation.  With replacement insurance, you are reimbursed for what it will cost to replace your possessions at today’s market value.

The second consideration is coverage for loss of use.  This reimburses you for the expense of a hotel room or other temporary accommodation if you’re temporarily forced out of your home.  Loss of use coverage is usually limited to 20% of the personal property limits on your policy.

The Best Defense Against Mold Is a Good Offense

Posted on by steve hom

Recent natural disasters like Hurricane Katrina have once again put mold in the spotlight.  And since flooding can occur in the winter due to the abundance of melting snow and heavy rains, homeowners need to familiarize themselves with the steps to eliminate mold from their homes.

First, it is important to understand the reasons to keep your home mold free.  According to the Centers for Disease Control, exposure to mold poses a potential health risk.  People with mold sensitivity can find themselves with a stuffy nose, irritated eyes, wheezing, or skin irritation.  Those with mold allergies can have difficulty breathing and experience shortness of breath.  If someone with a weakened immune system or chronic lung disease is exposed to mold, they can develop mold infections in their lungs.  The point is to eliminate the problem before it becomes a health issue.

As we know, mold develops because of excessive moisture, so the key to prevention is to identify and eliminate moisture from developing in the first place.  The Insurance Information Institute recommends that homeowners take the following precautions:

Reduce humidity in your home

 

  • Keep the humidity level in your home between 30 and 60 percent by using air conditioners or dehumidifiers.
  • Use exhaust fans in kitchens and bathrooms.
  • Never install carpets in damp areas, such as basements or bathrooms.
  • Never let water accumulate under houseplants.

 

Use mold-reducing products

 

  • Clean bathrooms with bleach or other mold-eliminating products.
  • Add mold inhibitors to paint before application.

 

Keep your home and belongings dry

 

  • Fix leaky pipes, faucets and hoses.
  • Keep gutters free of leaves and other debris.
  • Maintain your roof to prevent water from seeping into your home.

 

Be careful after a flood or other water damage

 

  • ·Properly dry or remove soaked carpets, padding and upholstery within 24 to 48 hours after a flood to prevent mold growth.  Anything that cannot be properly dried should be discarded.
  • Remove standing water as quickly as possible.  Standing water is a breeding ground for microorganisms, which can become airborne and inhaled.
  • Wash and disinfect with bleach, or other mold-eliminating products, all areas that have been flooded.  This includes walls, floors, closets and shelves, as well as heating and air-conditioning systems.

 

If you find that despite your best efforts you have mold problems, there are two options to remediate the situation.  The first is to clean it yourself.  If you choose this option, you should limit your own exposure to the mold and its spores.  The Environmental Protection Agency recommends that you wear certain protective gear during cleanup, most importantly an N-95 respirator, which can be purchased at most hardware stores.  Some N-95 respirators look like a paper dust mask with a nozzle on the front, while another popular style is made of plastic or rubber and has a removable cartridge that traps the mold spores.  No matter what style you use, in order to be effective, the respirator must fit properly.

The second item the EPA recommends is a pair of long gloves that extend to the middle of your forearm.  If you are using a mild detergent, ordinary household rubber gloves are fine.  If you are using a disinfectant, chlorine bleach, or other strong cleaning solution, you should use gloves made from natural rubber, neoprene, nitrile, polyurethane, or PVC.  The third protective piece of equipment you should wear are goggles without ventilation holes. 

If there are still signs of mold after cleaning or if the mold returns, you should choose the second option and have the area cleaned by professionals who specialize in mold removal.

Do You Know How Your Deductible Affects Your Homeowner’s Insurance Premium?

Posted on by steve hom

As elementary school children, we were first introduced to the concept of ratios, or how one number relates to another number.  Back then we tended to think that like almost everything else we were learning, ratios were just one more forgettable piece of information we would never use.  Of course, we were wrong.  Ratios are something we constantly come in to contact with, even when it comes to our homeowner’s insurance.

The ratio between the policy’s deductible and the premium is very real.  When the deductible increases, the premium decreases.  With a higher deductible the carrier is transferring more of the risk to you.  Yet, four out of ten Americans carrying homeowner’s insurance do not understand that simple ratio and its consequences.

The Insurance Research Council (IRC) recently conducted a study that indicated only 37 percent of homeowners and 48 percent of renters, who have homeowner’s insurance, knew their policy had a deductible.  These same respondents also answered incorrectly when asked how a deductible increase affects a premium.  They responded that the premium either increased, stayed the same, or they did not know.

The data for the IRC’s report, Public Attitude Monitor 2005, Issue 2, came from a survey conducted by TNS NFO, a market research company.  The survey was designed as a self-administered checklist mailed on January 1, 2005, to selected households in the U.S.  There were more than 55,000 respondents ages 18 or older who answered six questions about homeowner’s insurance.

Many Americans may overlook the easiest way to reduce insurance costs simply because they do not understand the relationship between their policy’s deductible and the premium.  The Insurance Information Institute, in their publication entitled, 12 Ways To Lower Your Homeowner’s Insurance Costs, has this to say about the relationship between the two:

“Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy.  The higher your deductible, the more money you can save on your premiums.  Nowadays, most insurance companies recommend a deductible of at least $500.  If you can afford to raise your deductible to $1,000, you may save as much as 25 percent.  Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage.  If you live near the coast in the East, you may have a separate windstorm deductible; if you live in a state vulnerable to hail storms, you may have a separate deductible for hail; and if you live in an earthquake-prone area, your earthquake policy has a deductible.”

The next time you review your homeowner’s coverage, be sure to talk with your agent about how increasing your deductible will impact your premium.  It may surprise you just how much you can save.

Uncovering Common Misconceptions About Flood Insurance Coverage

Posted on by steve hom

According to the National Flood Insurance Program (NFIP), flooding is this country’s most prevalent natural disaster. In the years between 1995 and 2004, flood losses in the U.S. averaged $867 million annually. There are about 4.7 million citizens who have taken advantage of the government’s flood insurance protection, however large numbers of at-risk Americans still refuse to find coverage.  After hurricane Katrina last summer, when nearly 80% of New Orleans was underwater, it is surprising that people would not seek such coverage, since their homeowner’s policies do not insure them against floods.

Part of the problem stems from the innate sense that if it’s offered by the federal government, applying for it must be: a) tied up in red tape, and b) too complicated due to all the exclusions. Both of these statements, however, are not true. Let’s examine some of the commonly held beliefs about flood insurance:

 

  • You can’t buy flood insurance if you are in a high-risk area.  Flood insurance is available to all homeowners and businesses in any community that participates in the NFIP. You can check to see if your community participates by visiting https://www.fema.gov/fema/csb.shtm. The only issue which would prevent you from obtaining flood insurance is if you reside in a Coastal Barrier Resource System location, or a location that is designated as an Otherwise Protected Area. Land that falls under these two categories are undeveloped areas along coastlines. The flood insurance program doesn’t provide coverage in these areas to discourage settlement where there is an extreme risk not only for flooding, but potential loss of life.
  • You can only get flood insurance if you are a homeowner.  Condominium/co-op owners, apartment dwellers, and commercial/non-residential building owners can purchase NFIP coverage. There is a maximum of $250,000 worth of coverage on a one-family residential building. The maximum per-unit coverage limit on a residential condominium/co-op association building is also $250,000. Contents coverage for any residential building is limited to $100,000. Commercial/non-residential structures can be insured for a maximum of $500,000. You can also insure the contents of commercial buildings up to $500,000.
  • You have to wait 30 days for flood insurance protection to take effect. Usually there is a 30-day waiting period from the time a policy is purchased until you are covered. However, there are some exceptions. There is no waiting period if you already have a flood insurance policy, but need more coverage to increase, extend or renew a loan, such as a second mortgage, home equity loan, or refinance. Coverage is effective immediately, as long as you pay the premium at or prior to loan closing. There is a one-day waiting period when additional coverage is requested because of a map revision. This applies when the NFIP revises the map so that a non-Special Flood Hazard Area becomes a Special Flood Hazard Area. Coverage must be purchased within 13 months following the map revision to be applicable for the reduced waiting period.
  • You can get Federal Disaster Assistance even if you don’t have your own flood insurance policy.  The Federal Disaster Program will only provide coverage to uninsured individuals or businesses if the affected area is declared a federal disaster area, which occurs less than 50% of the time.  Statistics show the awards average about $4000 dollars and most are made in the form of a Small Business Administration Loan, which must be paid back with interest.  Furthermore, the award recipient must carry flood insurance for the duration of the loan.

 

To learn more about the terms of flood insurance coverage, log on to https://www.floodsmart.gov/floodsmart/pages/faq_policy.jsp.

Source: FEMA Publication F-216 (08/04) and www.floodsmart.gov