Homeowner's Insurance on their Unit

Started by JeanS1 • 10 replies • 1199 views

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JeanS1 (California)
Posts: 23

Posted:

Our CCR's and Bylaws state that each individual homeowner must have fire and liability insurance on their unit. Many owners are not complying.
What do other association's do to get individual owners to cooperate?

Jean Strauber
Encino CA

KirkW1 (Texas)
Posts: 1,665

Posted:

Wow, I would think that the bank would require it as well. What do your documents say on enforcement?

JeanS1 (California)
Posts: 23

Posted:

Hi Kirk,

Actually, how would the bank know after the first year? Unless they require an annual statement?

Our by-laws call for each owner to have it. There is no mention of any penalty if they don't. We do have fines if the building rules and regulations are violated.
I'm wondering if we can impose those.

Jean

EllenS1 (Florida)
Posts: 1,148

Posted:

Unless the sale was a cash deal the lender usually requires taxes and insurance be escrowed and the lender pays them out of the escrowed funds.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Jean,

My Villa unit requires all homeowners to have an annual proof of insurance with a copy on file in the office. Failure to do so will result in a letter from the attorney with those copys sent to the mortgage holder and a daily fine of $25.00 with a maximum of $1000.00 wich is allowed by the State of Florida. This is serious business because of the close proximity of units. Everyone realizes that the financial burdeons of late are sometimes requireing owners to find ways to save money but we have it in our documents as you also do. Therefore it is a non compliance issue.

MikeS1
Posts: 668

Posted:

When you say "unit", I assume that you're referring to a Condo. The bank is not going to require insurance since the COA usually has a Master Policy that covers the dwelling, but there's usually a gap in covergage. There's a myriad of different scenarios that define where the Master policy leaves off and where the unit owner HO6 condo (optional) policy starts. Generally these are cheap policies that pick up coverage for "Betterments or Additions and Alterations", structural items not covered by the master policy, in addition to contents, personal property and liability.

I'm not sure how you could entice the owner to secure coverage, unless it's already written into the documents, but we require the renters to have a Tenants policy (HO4) in addition to the unit owner's policy,and they don't get pool passes until a copy of the policy and a copy of the lease is on file with the property manager.

The Liability issue is huge here. If someone is negligent and causes a large fire or water loss, it's always nice for the COA's insurance company to be able to recover the damages via subrogation if the Master policy has to pay, or sometimes, the property damages are paid for directly by the carrier who has the liability coverage in place.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By JeanS1 on 07/20/2008 12:00 PM
Hi Kirk,

Actually, how would the bank know after the first year? Unless they require an annual statement?

Our by-laws call for each owner to have it. There is no mention of any penalty if they don't. We do have fines if the building rules and regulations are violated.
I'm wondering if we can impose those.

Jean

The bank would know because they require to be named as a loss payee on the policy. If the policy is cancelled or not renewed, the insurance company notifies all loss payees, including the bank.

MikeS1
Posts: 668

Posted:

What is the form of ownership here? Are we talking about a condominium?

KirkW1 (Texas)
Posts: 1,665

Posted:

Generally, if you don't have 20% equity when you originate the loan the bank requires an escrow account. Then your insurance and taxes are paid by the bank. That way they know you have paid the bills. If I change insurance companies then I have to let the bank know and tell the agent to contact the bank. The agent calls and gets the information and all is taken care of. The thing I don't get is why my HOA dues are not in the escrow account.

EllenS1 (Florida)
Posts: 1,148

Posted:

Kirk,

It would be great if assessments were escrowed but the lender is not concerned since their lien comes before the HOA assessment. The lender is concerned about taxes which come before the mortgage and naturally they require insurance to protect their investment.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Our villa had a mortgage on it and the large Florida bank required us to escrow insurance. We bought the insurance but the agent then forwarded the bill for it to the bank who in turn paid the premium from the escrow account, along with the property taxes. It is required of all loans when there is a policy required from the association. It seemed like a little extra work for the bank but this was standard policy from them.

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