Co-op living spaces have special insurance needs for which the residents are responsible. Here’s our quick guide to this unique property insurance situation and the best ways to protect yourself and your possessions.
Co-ops are the housing option of choice for New Yorkers, representing around 85 percent of all apartments available for purchase in NYC. However, since co-op residents don’t own where they live—rather, owning shares in a corporation that owns the property—their insurance responsibility is a little different than the average homeowner’s.
It’s a costly error to presume that the co-op managing entity’s insurance will cover your personal property. Just like in a condo, it’s the resident’s responsibility to protect their own interests. And note that an individual co-op may require residents to carry their own policies.
What is a co-op master policy and what does it cover?
The master policy is insurance for the whole building and all the apartments in it. It’s set up by the managing entity but paid for by residents via association or maintenance fees. Master policies vary by co-op but typically cover against loss by vandalism, fire, and water damage (but not flood damage, which is a separate insurance concern).
Common areas shared by residents—such as elevators, boilers, roof, stairways, and basement—are usually covered for both physical damage and other liabilities. Master policies protect the building association from any property damage or personal injury claims, as well as protecting directors and officers from claims made against them during their board tenure.
In some cases, a co-op’s master policy will only cover the ceiling, walls, and floors of an apartment, which leaves the resident to cover the costs of damage or loss related to anything else inside. If the property is in a risk zone, some master policies offer residents a little more protection against crime or flood damage.
What residents need to cover beyond the master policy
The major difference between co-op and homeowners’ insurance is the structure of the coverage. Co-op residents need only insure everything from the walls of their apartment inward, while homeowners insurance usually includes the entire property. Some master policies do cover things like standard fixtures, but insurance for alterations or remodeling of any kind, like bathrooms or kitchens, is typically up to the resident.
It’s not uncommon for a co-op board or management company to demand that potential residents have a certain amount of personal insurance in place before considering their application. Residents should contact the management company or co-op board for more information on which parts of the structure they’re responsible for and insuring. This will make it easier, and possibly cheaper, to take out the appropriate personal policy.
An individual policy on a co-op should cover:
- Personal property
- Loss of use should the apartment be rendered unlivable (which may incur additional living expenses)
- Personal liability for injury or property damage
- Any improvements, additions, or alterations made to the space
It’s a good idea to consider flood insurance if your co-op master policy doesn’t include it. New York’s battle against water is projected to get tougher in the years to come, so the risk of flood damage on lower-level units could be increasing.
Unit Assessment coverage offers co-op residents a way to recoup charges if a covered loss, such as a flood or a fire, affects the whole building. Since all affected residents would have to split the expense of the repairs, including unit assessment in your personal policy could help you get reimbursed for your share of the repair cost.
It’s a good idea to add floater coverage for items of significant financial value (like jewelry) since your co-op’s master policy probably doesn’t provide coverage against crime. Keeping an inventory of the possessions in the co-op space will make it much easier to prove the value of damaged possession if you need to make a claim with your insurer.
We highlighted umbrella coverage in a previous blog, and that’s an excellent way for residents to protect themselves against unusually expensive accidents or other claims. Umbrella insurance takes over when the limits of traditional insurance have been reached, offering a further layer of financial protection.
According to the Insurance Information Institute, residents can add $1 million in coverage for around $150 to $300 a year, with an extra million costing around $75, and $50 for every subsequent million.
Lastly, ask the management company/co-op board if residents are eligible for any common discounts that you might not be aware of. For example, if the building is fire-resistant or has a doorman (which increases security), that may reduce your cost of coverage.
These are the basics of co-op insurance. NICRIS is here to provide you with the insurance solutions that are best suited to you and how you live. Let us know how we can help you get the right coverage in place. We provide a free, personalized review, or you can get in touch by dropping us a line!