A Guide to Condo Association Insurance

When reviewing coverages in your NJ Condo Association insurance plan, it’s critical to know how the condo association and unit owners share risks and responsibilities. Condominium is an interesting word that was invented to convey the model of shared ownership. It joins “con” as connecting or coming together and “dominion” as a home or domicile. 

The concept of sharing applies beyond defining owners’ rights to the land and buildings to splitting the responsibilities of managing risks between the condo association and condo unit owners. 

It is a legal requirement for NJ condo associations to have a master insurance policy. Section 46:8B-14 of the New Jersey Condominium Act addresses the responsibilities of the condominium association as follows: 

The association, acting through its officers or governing board, shall be responsible for the performance of the following duties, the costs of which shall be common expenses:

The maintenance of insurance against loss by fire or other casualties normally covered under broad-form fire and extended coverage insurance policies as written in this State, covering all common elements and all structural portions of the condominium property and the application of the proceeds of any such insurance to restoration of such common elements and structural portions if such restoration shall otherwise be required under the provisions of this act or the master deed or bylaws.

The maintenance of insurance against liability for personal injury and death for accidents occurring within the common elements whether limited or general and the defense of any actions brought by reason of injury or death to person, or damage to property occurring within such common elements and not arising by reason of any act or negligence of any individual unit owner.

NJ Condo Association Insurance protects against losses relating to the property and liability risks of common elements, buildings, and property. These coverages are essential to safeguard association boards and management. Associations choose from three types of property damage coverage to individual units:

• Bare walls coverage – covers basic building structures, including walls, floors, roofs, and elevators. It leaves unit owners to obtain coverage for finishes such as countertops, bathroom and kitchen fixtures, flooring, appliances, carpeting, cabinets, and wall coverings.
• Single entity coverage – extends basic coverage to include finishes in individual units, excluding the unit owner’s personal property. It does not cover refurbishments on finishes. Improvements to the unit’s countertops, floors, and light fixtures are the unit owner’s responsibility.
• Modified single-entity/all-in coverage – covers the fixtures, installations, additions, or improvements within the interior surfaces of the perimeter walls, floors, and ceilings of individual units.

Additional coverages necessary to protect NJ Condo Association owners and management include: 

• Crime & Fidelity Liability – protects against theft and embezzlement by a board member or employee from the association’s operating reserve accounts through check fraud, invoice padding, phony invoices, computer, and wire fraud.
• Worker’s Comp Insurance – pays medical expenses for association employees injured while at work for the association.
• General Liability Insurance – covers three critical areas of risk exposure.
  • Bodily Injury & Property Damage Liability – claims due to non-professional negligent acts occurring on association premises or business operations. 
  • Personal and Advertising Injury – includes coverage for libel, slander, false arrest, infringing on another’s copyright, use of another’s advertising idea, malicious prosecution, wrongful eviction, entry, or invasion of privacy.
  • Medical Payments – provides payments for injuries sustained by a non-employee caused by an accident that takes place on your premises or when exposed to your business operations.
• Directors & Officers (D&O) Liability – insurance to protect the Condo board against management liability-related lawsuits. 
• Property Insurance: covers the property of the association, such as residential buildings, clubhouses, pools, playgrounds, fences, signs, and lighting. 

This NJ Condo Association Insurance guide intends to help condominium association management teams assess the perils they face and determine what coverages they need to protect themselves and their property against insurable risks. While the guide is detailed, it is not inclusive because situations vary widely. Therefore, it is incumbent upon condo management executives to assess all potential exposures they face, especially those exclusive to their development.

Given the current fast-changing insurance environment and the complex requirements of unique condominium developments, it is advisable to work with an agency with extensive experience in creating comprehensive Condo Association Insurance Programs. Dickstein Agency’s insurance professionals are eager to share their knowledge and expertise with you. Our goal is to help condo association executives make smart, informed decisions that lead to complete coverage at competitive prices. 

About Dickstein Associates Agency

Dickstein Associates Agency has distinguished itself as a leading provider of personal and business insurance in the tri-state area for over 55 years. We pride ourselves on being advocates for our clients and providing them with quality and affordable coverages. As an independent insurance agency, we partner with various carriers, allowing for flexible and unbiased coverage for each client’s unique circumstances. For more information on how you can leverage all of your insurance to work best for you, and how we can secure the best insurance in the marketplace based on your specific needs, contact us today at (800) 862-6662.