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My Co-Op, the largest In NYC, recently past a regulation requiring homeowner insurance with minimum dwelling coverage of $25,000 and personal liability coverage of $300,000. Noncompliance of this regulation will result in a $25 a monthly fine for every month without insurance.
The Co-Op claims that the Master Insurance Policy covers build out up to the interior walls, stock kitchen cabinets and bathroom fixtures. The Co-Op also claims that the insurance requirement was to ensure that those units with extraordinary upgrades beyond stock quality be covered.
I inherited my unit from my parents. NO improvements were made to our unit for over 40 years other than painting and normal replacements. There were NO valuable upgrades.
Why should I be forced to purchase insurance when the the Master Policy covers the build out? I am perfectly fine living in an apartment with stock cabinets and fixtures.
Now, our Co-Op has been grossly mismanaged. For our 5 1/2 room unit, the Co-op fixed a $250,000 resell price. This sell price is unattainable unless the unit is renovated to include fancy upgrades. I believe that this is the motivation for the board to institute this regulations- force owners to renovate and upgrade to maintain minimum resell value.
After shopping for HO6 insurance, I find it more advantageous to paid the $25 penalty per month than to purchase insurance. I would be saving hundreds of dollars!! All HO6 insurance includes coverage I don't need- personal property, loss of use, personal liability, medical and others to numerous to name. And, I can't strip these extra coverage of and just buy what I need which is the dwelling coverage of $25,000. If I were allowed to purchase just the dwelling coverage, it would be about $100 a year and I would be fine with this.
I do not need personal property insurance as i can easily replace these items. I don't need personal liability insurance because I have an umbrella policy.
My question is this. Can I just pay the fine?
Thanks in advance for any suggestion.
Steven 424,
Thank you for your advice.
As Steven424 noted, there are two issues here: (1) Does the Coop have the authority to compel shareholders to carry insurance; and (2) Is it in your interest to carry insurance?
As to (1) Check your proprietary lease. It is possible that the Coop's only way to impose financial costs on shareholder is through maintenance/assesments. Of course, challenging the insurance requirement would require you to get an attorney, etc.
As to (2) I think it's generally a good idea to be insured at least up to the value of the unit. But that's your call.
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You can decide to simply pay the $25, but you'll be putting yourself in serious financial risk. You mentioned two different types of insurance, dwelling coverage (casualty) and personal liability.
Personal liability protects you in the event someone sues you because they claim you were negligent and they were injured. Never mind the truth of their claim, you are being sued. How much do you think it will cost you to defend yourself against a negligence claim? How will you pay any judgment against you (which can run into the millions)? Consider the saying, "penny wise and dollar foolish."
As for casualty insurance, it is difficult to offer an opinion because the actual terms of the co-op's master policy are unknown. Try to get a copy of the policy and have an insurance broker look it over to see where your vulnerabilities are.
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