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Subject: Are residential condo bldgs considered commercial property for insurance purposes?
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02/18/2021 10:26 PM  
I’m a board member of a 24-unit residential condo. Farmers Insurance commercial underwriting is recommending some very expensive changes be made to our 40-yr old building for potential liability purposes. When I asked why commercial underwriting is advising a 100% residential structure, our HOA management company’s response was: we’re considered a commercial property because we are incorporated. Is that right?
Should commercial insurance underwriting be advising residential HOA buildings for insurance purposes? Or does it matter??


02/19/2021 4:35 AM  
Although I've never heard of a condo building being considered a commercial property simply because it's incorporated, these are legal questions that are best referred to an attorney. You should be talking to him/her anyway to review the policy to make sure the association's interests are covered. You might also want to check with the local zoning office to see what the building's considered.


02/19/2021 5:58 AM  
Shop other insurance companies.

It may simply be how that company handles condos (they treat them as apartments would be my guess).


02/19/2021 7:51 AM  
Your answer may depend on how your building is zoned. Good idea to check with your local zoning office as well.

Sikubali jukumu. Read all posts at your own risk.


02/19/2021 9:04 AM  
I think you're fine. Insurance for condo associations and HOAs is a package of coverages that includes property damage, liability, and other coverage for a business or corporation.

The property damage will be for your residential building, as will the liability coverage for the most part.

An insurance package typically includes some items for the association as a corporation, such employee dishonesty, director and officers coverage, and some miscellaneous coverage of business activity and equipment.

The insurance is in the name of your association, which is incorporated, so it is basically a commercial insurance package even though it includes coverage for your residential buildings. I'm not at all surprised this is "commercial underwriting."

If they are advising you to change things for the sake of liability, I would listen to the advice. The advice most likely concerns safety risks for your residential property.


02/19/2021 12:42 PM  
Thank you, everyone. All very helpful responses!

I checked with our zoning dept. Our building is zoned height-density residential.

JeffT2– Your points are well made, and I now have a better understanding as to why commercial underwriting would be involved.
(South Carolina)


02/19/2021 3:29 PM  

Is your agent maybe just trying to drum up some business? His recommendations needs to be closely looked at to be sure they are not self serving.


02/20/2021 9:15 AM  
There may be some regulations for certain asset repairs that require commercial grade products or government inspections or codes.

Double check what your agent is insuring.



02/20/2021 12:01 PM  
Find an insurance Broker not an Insurance Company. Brokers have a vast more arsenal of insurance companies that can write a policy that will suit the associations needs. These Big Boy insurance companies are in it for themselves.
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Forums > Homeowner Association > HOA Discussions > Are residential condo bldgs considered commercial property for insurance purposes?

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