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Co-op Insurance - Your Guide to Getting Home Insurance for Your Apartment

If you live in many parts of rural or suburban America, you may never have heard of cooperative housing, sometimes also known as a co-op apartment. While this type of housing arrangement is becoming increasingly popular lately, co-ops have been around for the last several decades in areas like Washington, D.C. and New York City. In cities with a high cost of living such as these, co-ops have been helping people purchase homes where they might not otherwise be able to afford one.

So what is a co-op, exactly? Basically, it is an apartment building with multiple units that are each owned by an individual resident. Each of those residents is known as a shareholder and takes a portion of the interest in the whole building. While co-ops are a great compromise in terms of affordable housing, they come with a distinctive set of insurance requirements that potential shareholders should be aware of before entering into any agreements.

How Insuring a Co-Op Is Different

When you purchase a share of a co-op apartment building, you immediately develop a unique insurance need. While the co-op association or corporation already has insurance on the building and common areas in addition to carrying liability for the association itself, this still leaves a lot of gaps for you. To further complicate matters, some associations cover more of their shareholders' units than other associations. While some cover fixtures of the units, others do not.

Unlike insurance a landlord carries for rental properties, co-ops often omit coverage for areas of the building owned by shareholders. Because of this, renter's insurance is not an appropriate fit for these apartments as it only insures personal contents. However, homeowner's insurance, which does cover the structure itself, is not a suitable policy either since it is designed for detached single-family homes. So what is a shareholder to do?

For many shareholders, the answer comes in the form of two or more policies. In order to have all of your insurance needs met, you will most likely need to purchase a policy to cover the apartment itself, or any renovations and fixtures the co-op association's master policy does not cover. Then, you will need to take out a policy to cover your personal belongings and provide liability coverage for guests in your home.

What a Master Policy Provides

The primary purpose of a master policy is to cover the co-op association's investment and provide liability coverage for any areas that are shared by all residents of the building. However, as a shareholder, you also take a share of the liabilities and assets for the entire building. This is why a master policy does not cover all fixtures and renovations in the building. What exactly does a master policy cover? Policies will vary from one corporation to another, but here are a few of the most common items covered by co-op master policies:

  • The whole exterior structure and shared areas should be insured against physical damage. This includes the basement, roof, elevator, walkways, and lobby.
  • Liability coverage provides protection for all of the above referenced areas.
  • Parts of your unit may be covered, such as original fixtures. However, this is not always true so be sure to find out before you have a co-op unit policy drawn up.
  • Walls, floors, and ceilings of each unit are often covered, but you should check with your association to be sure.

Coverage Checklist for Your Own Insurance Policy

Since the co-op corporation's master policy does not provide all of the coverage you need as a shareholder, you will want to make sure that all of your needs are met through policies you purchase on your own. Here are a few coverages you may require:

  • Personal property coverage to protect against theft, fire, and acts of nature.
  • Coverage for structural improvements, including updates to the kitchen or bathrooms.
  • Additional living expense coverage which will pay for a hotel room or apartment in the event your home is unlivable after a loss occurs.
  • Liability coverage to protect against lawsuits resulting from acts of negligence, dog bites, etc.
  • Unit assessment reimbursement coverage can help compensate you for charges you pay in the event of a loss in a common area. For example, if a fire occurs in the lobby, all shareholders will be charged a portion of the repair costs.
  • Water back-up covers losses that result from backed-up drains and sewers. This coverage is not always automatically available on a co-op policy, so ask if it is possible to add it for an additional charge. Note that this coverage is not the same as flood insurance.

Additional Coverages You May Require

No two shareholders will have identical insurance policies since everyone's needs are different. While the above checklist is a good foundation, here are a few other types of coverage you may want to consider just to make sure that your policy is a good fit.

  • A floater or endorsement for personal property. Most property policies have limits on how much coverage is provided for valuable property, such as jewelry, artwork, computer equipment, and instruments. If you happen to own one or more particularly expensive above referenced items, it is a good idea to inquire about getting an endorsement to increase your coverage limits for that particular item/s.
  • Flood insurance. This coverage is only available on a separate policy, so if you live in an area that is prone to flooding, it is a good idea to take out flood insurance since your standard co-op policy will not offer any coverage for this type of loss. Note that this coverage is not the same as water back-up.
  • Earthquake insurance. Several years ago, many insurers offered Earthquake coverage as a rider or endorsement onto property policies. While a few companies may still have this as an option, most now require a separate policy. If you have concerns about a potential Earthquake, ask your agent about adding this coverage to your portfolio.
  • Home business insurance. If you work from home, you may need an additional policy or a rider on your co-op policy to cover your work equipment. Small hobby businesses may not require additional coverage, but professionals who earn their living from home could require a separate policy as your co-op policy may not cover it.
  • Umbrella liability. If you need a lot more liability than your co-op policy provides, it would be worth your time to look into getting an umbrella policy. As an added bonus, this policy could help you get a multi-policy discount.

Unless you have been a shareholder in a cooperative housing unit before, there is a good chance that you have a lot of questions about how to adequately insure yourself, your belongings, and your family. Do not hesitate to ask your insurance agent a lot of questions about what is and is not covered. It may also be necessary to talk to your co-op association about the master policy to find out where gaps in coverage exist.

Finally, do not be afraid to seek out an insurance agent who has extensive experience in insuring co-op units. An agent who has written several co-op unit policies will be more familiar with commonly overlooked coverages and can possibly help you find discounts you did not even know existed.