There are many reasons that Nevadans choose to live in high-rise buildings. Perhaps for you, it’s the concierge services and great security. Or maybe you especially enjoy all the amenities. Just as high-rises offer residents a unique lifestyle, they also present unique insurance requirements for both associations and individual unit owners.
“Often, board members and residents that belong to high-rise associations are not aware of the specific types of insurance policies they need to stay protected,” says Jamie George, insurance product manager for the West and Texas regions. “Without proper coverage, a loss can have a significant effect on both the homeowners and the association.”
Whether you are a high-rise board member or simply the owner of a unit in your building, you want to make sure that the insurance you have is adequate. Here are seven things that you should do to determine if you have the right coverage.
1. Look for coverage gaps—and overlaps.
In general, homeowners are responsible for everything within their individual units. When they purchase insurance, it is for coverage of their personal items, as well as for any upgrades they make to the unit.
“Unit owners should know what their association policy covers so they are sure their policy corresponds to provide full protection without any coverage gaps,” says George. “It should be a dynamic relationship.”
Associations are responsible for the building’s “shell,” which begins at the perimeter boundary walls of the unit and extends outward (often referred to as “walls out”). This includes the property structure, as well as common areas such as the pool, lobby and fitness center.
Be sure that the association’s governing documents clearly spell out association versus homeowner responsibilities to avoid potential disputes or coverage gaps. Additionally, check that neither party is overpaying by having a policy that overlaps coverage provided by the other. You may not realize it, but if both a unit owner’s policy and the association’s policy cover the same risk, it’s the association’s policy that provides primary coverage.
2. Rely on an expert.
High-rise board members should look for an insurance broker with high-rise expertise. “We often see agents making big mistakes when they don’t have high-rise condominium experience,” says George, “and these mistakes have the potential to be very costly.” A knowledgeable brokerage firm, however, will have an extensive network of quality insurance carriers specialized in high-rise properties.
3. Beware of basing your choice solely on cost.
George warns that high-rise boards should not select their insurance based upon premium alone. “You need to look at whether the policy is the right fit. Does it provide adequate coverage? Is the deductible reasonable? These are the types of questions you should be asking.”
Rather, George suggests that your board choose its coverage based on value. “Your association’s goal should be to get the most coverage at the best possible rate,” she explains. “After all, the point is to have peace of mind. Without it, any amount you pay is too much.”
4. Determine what type of coverage you need.
Nevada law (NRS 116.3113
) requires that associations carry:
Property insurance, which protects against most risks to property, such as theft, fire and certain weather damage. It covers the cost of rebuilding your association’s tangible assets, including residential buildings and their contents (but not inside the walls of individual units), swimming pools, tennis courts, gates, sidewalks, streets, trees and other common elements.
Commercial general liability insurance, which protects against claims of liability against bodily injury, property damage and personal and advertising damage.
Crime insurance, which offers protection against loss of money or inventory resulting from dishonest acts by the executive board, officers, employees, agents, directors and volunteers. It also covers any business entity that acts as the association’s community manager, as well as its employees.
Directors and officers insurance, also called “indemnification” or “professional” insurance, which protects directors and officers if they are personally named in a lawsuit for something they may have done (or neglected to do). For example, claimants may say the board did not follow bylaws, or they may file a suit as a result of an architectural dispute.
Workers compensation, which covers employees and contractors for injuries that occur on the job. You can also include coverage for volunteers through a volunteer compensation endorsement.
Keep in mind that property insurance will only reconstruct your building to its original safety standards in the event of damage. However, if your building is older and was built according to outdated standards, you will be required to bring it up to current code, which can leave you with significant out-of-pocket costs. The solution? Building ordinance and law coverage, which can fill this gap if you purchase all three parts:
Coverage A—Loss to the Undamaged Portion of the Building
Coverage C—Increased Cost of Construction
Individual unit owners in Nevada are required to have their own insurance, too, known as “HO6 condominium insurance.” This covers the personal contents of the unit, as well as any upgrades beyond what constitutes a “standard unit” according to your association’s governing documents. HO6 encompasses both property and liability coverage. In addition, it includes loss assessment coverage, which takes care of an individual’s share of any special assessments that an association levies to cover remaining out-of-pocket costs after its insurance pays out on a claim.
5. Have your policies reviewed annually.
A qualified expert should review your insurance policies every year to make sure that you continue to have the coverage you need. This applies equally to association policies and unit owners’ policies. Above all, don’t allow a broker to assume that any aspects of your previous policy can be excluded from a review.
6. Mitigate your risk.
Insurance rates are determined by two factors: value of the item being insured and the level of risk. Since you cannot control the estimated cost of reconstruction (value), the only thing you can alter if you want to reduce premium costs is your risk. Keeping up on maintenance can help. Speak to an experienced community management company
to find out what else you can do.
7. Work with a knowledgeable community management company.
Having a professional management company
with high-rise experience, national buying power and a local presence can offer the insights and resources your association needs. A firm with this background will be able to negotiate lower rates on your behalf, as well as provide you with the names of qualified insurance brokers who know the Nevada regulations that directly affect your insurance needs.
Hopefully, neither you nor your association will ever have to face damages or loss. But at least with the right coverage, you can have the peace of mind of knowing that you are prepared for the possibility.
Learn more about how the right management company can help ensure that you have the insurance coverage you need. Reach out to FirstService Residentia
l, Nevada’s leading property management company.
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