Last week, I reviewed a fairly new nonprofit called First Street Foundation, established to help homeowners understand FEMA flood zones and potential flood zones not yet recognized by FEMA. I also pointed out what I feel is a valuable addition to realtor.com for potential homeowners called the Flood Factor, which provides valuable information to all homeowners and potential homeowners about the flood risk of a particular property.
But what if you live in a condominium complex or are considering purchasing a condo that is in an established flood zone?
Condominium flood insurance is a different animal than flood insurance for a single-family home. The principals are the same, but the requirements and responsibility for condo flood insurance are completely different.
Recognized condominium associations – the corporate entity responsible for the management and operation of a condominium – is eligible to purchase flood insurance for all common property located in a special flood hazard area. The boards of directors of condominium associations typically are responsible under their bylaws for maintaining all forms of property insurance necessary to protect the common property of the association against all hazards, including flooding.
The cost to cover the condo association’s flood insurance is included in each individual homeowner’s fees and is something that condo owners who live in a flood zone should be proactive in understanding. If the association does not carry adequate insurance or is negligent in allowing it to lapse, the owners will be responsible for the damage in the event of a flood.
In addition, condo owners who have a mortgage on their unit will be required to give proof on an annual basis to their lender that the condo association does provide adequate insurance for the association’s property. If this proof cannot be provided, mortgage lenders could purchase a policy on the owner’s behalf to protect their investment.
Many condo owners have additional flood insurance for their individual units. This, in my opinion, is a gray area as to whether or not it’s necessary and what exactly it covers, especially if the property is well above typical flooding for the location. My personal experience is that obtaining personal flood insurance is not as easy as it sounds. I was asked to provide elevation certificates and pictures of the building I live in and one time after I had paid the premium, it was refunded, and the insurance turned down. However, per FEMA’s manual, this is a conversation you should have with a qualified insurance broker who sells flood insurance for FEMA if you want to add a flood policy to your condo.
Another confusing area of flood insurance is what it covers or doesn’t cover. Damage caused by moisture or mildew that could have been prevented by the homeowner is not covered; living expenses or temporary housing, damaged vehicles, business interruption and other fine print areas are not covered. Also, if water gets into your condo during a storm there could be an issue as to where the water came from and if the damage is covered by your homeowner’s insurance or your flood insurance policy.
Condo flood insurance is one of the most misunderstood areas of flood insurance in general. It’s important that you know and understand what your condominium association covers and that they are competent in their decisions on your behalf. If you think adding a personal flood policy is beneficial, this is something where you will need to get additional advice.
We seem to be making better progress in understanding flood insurance and since our hurricane season is just about over, it’s easy to put out of our minds, but something you need to stay on top of. Stay safe.
