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Due to insurance banking regulations on most coop and condo purchases only requiring what most insurance professionals state is minimum coverage - in case of a loss, the majority of owners are woefully underinsured. These limitations include but are not limited to - what you own (furniture, clothing, electronics, fine arts and collectibles, jewelry, etc.), costs to rebuild, protection in case someone gets injured on your property or something that happens in your property causes damage or injury to someone else or someone else's property. If I've piqued your curiosity, I'm offering a no obligation review of your insurance needs, exposures and how you are covered. You're welcome. Wayne Margulies, 212-338-2203 or wayne.margulies@hubinternational.com
Join the Conversation Comments (2)That's a very good question with not a very simple answer. Every lending institution has their own guidelines, as well as guidelines for the specific building and property. Then add in individual board and/or association rules, well you can see the possibilities are endless. Best guidelines are to require limits specific to the specific property and that "Guaranteed rebuild", regardless of limits purchased are included along with enough liability protection - damage to others property or injury to others - within the context of the dynamics of the building. In Manhattan - it's not uncommon to have High Net Worth (HNW) and Ultra High Net Worth (UHNW) neighbors. Imagine your bath overflowed and caused damage not only to your next door neighbor but also your downstairs neighbor AND their next door neighbor. It happens. Imagine one was a fine arts avid collector - value $10- $50 million and all you had purchased was $1-$5 million (typical amounts purchased without an appropriate review) of excess/umbrella coverage. Now imagine some of the fine arts of your neighbors damaged or destroyed to the tune of $25 million. Well your insurance should cover up to the limits you purchased, but then you will be personally on the hook for amounts not covered by insurance, which to most would be a catastrophic event. There are too many scenarios which is why a comprehensive individual review of your specific needs is essential.
Following is one example of what I call minimum banking requirements - leaving the owner completely exposed, while thinking - "I have insurance!"
o The policy must be equal to 20% of the appraised value OR state that the amount is sufficient
Appraised value has no relationship to what it may cost to rebuild, what your personal property is, loss of use if you need to live someplace else while your property is being repaired, the liabilities each of us faces.
The mortgage bank is only interested in being made whole in the event of a full or partial loss to their collateral, i.e. the apartment or building. In a co-op, the loss of the building is the responsibility of the co-op corporation. Each shareholder is only responsible for the basic outfitting of the contents of the apartment. That's why mortgage banks want to see a copy of the co-op's underlying liability policy and may or may not require a separate co-op owner's policy.
While I've never seen a bank not requiring a "separate coop owners" policy, I think you immensely for adding this post as it just goes to support - that banking requirements or lack there of have no relationship to what an individual or family or business needs to have in place to protect what they own, who they love, and what they care for. If there are coop or condo owners without homeowners insurance plus an umbrella or excess insurance policy regardless of bank regulations, you must fix that today. Our world is litigious. Without insurance, you will be personally responsible and unless UHNW- you do not have the available funds to cover a loss.
So what you're saying is that if my downstairs neighbor has a $15MM Rembrandt hanging in his bathroom and my tub overflows, I need to have enough insurance to fully cover his loss?
If you live in that world - then yes, you need to own appropriate limits as you would be responsible for that type of loss if the the cause of the loss occurred in your property. In your scenario, the board would have a better idea of who lives in their building, and their rules would require higher limits and be stated in the by-laws. Naturally I'm hoping someone with a $15mm Remebrandt would not have it hung I a bathroom or underneath someone else's bathroom, but common sense is not and exclusion or requirement of insurance or liability. What I'm hoping to share is that most individuals are under insured and the same way your taxes are reviewed annually, so should your risks and exposures - especially if you work with one of those direct carriers who allow to state what you want to pay, or we've been there, or have animated spokespeople as well as worldwide call centers with faceless reps. These reviews should include your homeowners, auto, valuable articles- i.e. - fine arts, collectibles- jewelry, musicals instruments, stamps, coins etc - as well as your life insurance, disability insurance and long term care insurance policies - as life changes, and we cannot rely on protections that were put out n place sometime in the past have kept up to date with who we are now.
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What is the minimum coverage required by insurance banking regulations?
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