Understanding the details of a property insurance policy can be tricky. If the property is a multi-family, it adds an entirely new level of complexity to the process.
Rental apartments, condominiums and cooperative apartments are the three most common types of multi-family properties. When it comes to property insurance, all three have many characteristics in common.
Here are four things to consider when evaluating multi-family property coverage:
Insurable Property Exposures
Each type of multi-family property has a range of insurable property exposures. All call for building management to purchase insurance on the resident-occupied buildings as well as any other property such as a clubhouse, swimming pool, health facility, tennis court, golf course and related personal property, etc., that may require insurance.
Personal property owned by residents is the responsibility of the residents to insure, but there may also be personal property owned by the building owners—and this should be included with the building insurance. Make sure to review your policy to see what personal property items are covered.
Covered Causes of Loss
When evaluating coverage options for a multi-family property, take time to compare the list of covered and excluded causes of loss. In most cases, basic coverage only includes a limited group of covered causes.
Although the least expensive form, this type of coverage should be avoided as there are too many other perils not covered here that can also produce severe loss. Consider Broad Form coverage, which expands the list of covered causes to include things like falling objects, weight of snow, ice or sleet and more.
Consider the Deductible
Most insurers insist on a mandatory deductible clause applying per occurrence to all or most of the insured causes of loss. In deciding what level of deductible to choose, several factors should be considered:
- Available premium savings in dollars compared with the insured’s probable increased participation in any future loss payments.
- Past loss history, meaning the severity and frequency of past losses as a measure of the savings vs increased cost with various deductible levels.
In the case of condominiums and possibly co-ops, the unit owner should also carry building coverage to meet the condo association’s deductible, which sometimes can be as much as $10,000 per occurrence. This is so that if the condo has a loss, the high deductible for the association will come first so the unit owner will be covered if they have their own building coverage up to the condo’s deductible amount.
Reviewing the lease provisions is one of the most important parts of arranging insurance for a multi-family property. A major provision for apartment rentals is the Lease Cancellation Clause. The Lease Cancellation Clause will determine under what circumstances the lease may or must be cancelled by the owner or the resident.
Particularly important is the provision relating to inability to occupy the premises following damage by fire, wind or other loss. These provisions vary widely from lease to lease, and with each variation a different approach to insurance needs may be required.
Have questions about your property insurance claim? Feel free to contact Stark Loss for more information about how a Public Adjuster can help.