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A New Condo Insurance Twist in Maryland

Consider this scenario, Maryland condominium owners: A kitchen fire in your unit damages not only your home, but causes thousands of dollars of damage to the electrical and air conditioning systems outside your unit. Who has to pay for those damages to that commonly owned property, you or the condo association?

A new state law that went into effect June 1 clarifies that you (and your insurance company) are responsible for repairing damages to your unit, and the condo association (and its insurance company) is responsible for repairing damages to the commonly owned property. What's new is that the condo association can require you, the owner of the unit where the fire started, to pay up to $5,000 of the association's insurance deductible covering repairs to that common property.

Condo associations are required to tell unit owners about this new potential liability, in writing, every year. If you sell your condo unit, the sales contract has to include such a notice as well.

Jamie Coyle, owner of an Allstate insurance agency in Columbia and Ellicott City, said he's calling condo-policy clients to make them aware of the potential for being on the hook for that association deductible. If they have "extended protection" on their unit, that would cover the expense, he said.

Basic condo unit-owners' policies cover the stuff inside your unit, from the appliances and flooring (as long as they are standard-issue for that condo building) to your furniture and clothing, Coyle said. You would need extended protection to cover upgrades, say if you had installed better carpeting or remodeled your kitchen with fancier materials than provided by the builder. Extended protection adds about $55 annually to an Allstate policy, he said. Basic condo unit insurance policies might cost about $190 annually for a $40,000 policy (including discounts for having home and auto coverage) to maybe $500 annually for $300,000 of coverage.

If you're already paying $500 for an insurance policy, the extra $55 is only an 11 percent increase. But if your annual premium is only $190, $55 would be a hefty 29 percent increase. If you don't have a lot of upgrades to your unit that would help justify the extended protection, you might consider self-insuring for that new risk that you would have to pay the condo association's deductible. In other words, bank the $55 (or whatever other insurance companies are charging) each year and take the risk that you'll have to write a $5,000 check in case of a big insurance claim.

What's your call: Would you beef up your insurance or take your chances?

By Elizabeth Razzi  |  June 2, 2009; 6:00 AM ET
Categories:  Insurance , Selling  
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Is there a typo? Why would I have to write a $5000 check, if it's a $500 deductible?

In general, no, I wouldn't insure for a $500 deductible. My own deductible on my house is @ $1,000- $2,000. I know I'm not going to make a smaller claim anyway, since they'll just raise my rates and possibly cancel my insurance if I do (we almost couldn't get insurance on our current house, because we had two unrelated claims on two completely separate properties over the previous 5 years). So might as well save the $$ on the premiums.

Posted by: laura33 | June 2, 2009 11:05 AM | Report abuse

Yes, 'twas a typo and now fixed to read $5,000.

Posted by: Erazzi | June 2, 2009 12:00 PM | Report abuse

There seems to be a confusion regarding $500 deductible of the condo owner's policy VS $5000 deductible of the condo association's policy.
If the claim involves repairs to the common property (not exclisively the condo owner's damages) covered by the condo association's insurance, the deductible of the condo association policy which can be $5000 (Or higher in some cases) will now be legally allowed to be collected from the condo owner. Therefore Allstate's extended protection coverage is a good solution which offers this extra coverage to cover this $5000 expense which the insured could become responsible for in these situations. If you do not have the extended protection coverage, the condo owner's policy does not provide coverage to cover the $5000 deductible required to be paid by the condo owner and therefore it does not matter whether the condo owner's policy itself has $250 deductible or $500 deductible, there will be no coverage.

Posted by: agenthut | June 4, 2009 9:09 AM | Report abuse

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