How does property insurance work for condos?

Asked by JB, 94107 Tue Jun 17, 2008

I've asked this as an aside in an earlier question, and didn't really get a response.

What happens for a condo if a multi-unit building is destroyed (fire/earthquake/whatever), but only a small number of people have the financial resources to rebuild? Do those of us with resources (eg, via insurance) have to buy out the others? Do we each end up owning a tiny slice of land? Does our money get tied up for years as everyone fights about what to do?

My building (where I rent) is 12 units; what if the building were destroyed, but only a couple of owners have insurance? That insurance might cover their own losses, but couldn't rebuild the entire structure. What happens?

This seems like something that must have been worked out given the prevalence of both condos and earthquakes in California.

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Stig Mallovitz’s answer
Stig Mallovi…, Renter, San Francisco, CA
Fri Nov 18, 2011
Why are these "experts" so ill-adept at answering the simple question? He wants to know what an apartment owners' rights and obligations are with respect to getting his unit back after catastrophic building fail, regardless of insurance.

For sake of simplicity, let's assume he owns unit 401 on the 4th floor of a 20 story building with 500 residential units that occupies a whole city block. Say the building has normal HOA insurance, but it is destroyed in a terrorist bombing that is not covered by the policy.

What happens now?
0 votes
Sally Rosenm…, Agent, San Francisco, CA
Tue Jun 17, 2008
Dear JB,

In general, your HOA insurance covers replacing the building and what was inside the units prior to your moving in... the floor plan, the kitchen cabinets, bathroom sink et al. Your refrigerator and washer & dryer are considered personal property.

Your furniture, window coverings, clothing and the like need to be covered by what I like to call "Renter's Insurance." The policy would also include stuff like furs, jewelry and cameras under what is known as a "Floater." This insurance covers most things except earthquakes which are considered an act of God. It is often best to use the same company as your HOA insurance. This way if someone falls halfway in and out of your door and breaks his/her leg, you do not have 2 different companies fighting over who has to pay.

HOA Insurance covers the buidling - period. Individuals do not have to pay to separately. One always needs to read the Condo documents to make sure.

Since you are currently renting, I would suggest you start calling about Renter's Insurance right away. You can go to my website - - hit the links for Resources and look up insurance companies for a start. Or ask your friends for names. If the building burned down, it would be the responsibility of the owner and you would need to check with him/her to find out what type of policy is in place for the building. But that policy would probably not cover your belongings or furniture.

Hope that helps!

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Jed Lane, Agent, Petaluma, CA
Thu Jun 19, 2008
Earthquake insurance is expensive and a lot of people decide to run the risk that if there is a major earthquake the property will be damaged by fire instead of just structural and would then be covered by the fire insurance. So if the damage is done by a coverable cause the loss is covered. Insurance can be seen as a gamble. You are betting something will happen and the insurace company is betting it won't. When something does happen, many times the company will look for ways to say it isn't convered and you have to be able to prove it is covered.
All condo associations have boards and if you live in one be active on the board. If they don't have insurance and your research says they should then advocate for it.
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JB, Home Buyer, 94107
Thu Jun 19, 2008
Thanks, guys. This now makes a lot more sense. I failed to mention in my original question that I rent now, but am looking to buy.

So on the earthquake front: the answers seem to say that not all buildings have earthquake coverage. I still have to ask: what happens then if the structure fails in a seismic event?

If I had a single-family-home, then it would be up to me and my own finances/insurance to find a way to rebuild my own independent structure. But in a condo, there's no way that I could afford to rebuild the entire building. And I assume that there's no way that an individual can buy insurance for the entire building. So, for buildings w/o earthquake insurance: what happens if the structure fails?

This is definitely not academic, especially given that my favorite neighborhoods are in the liquefaction zone!
0 votes
Jed Lane, Agent, Petaluma, CA
Wed Jun 18, 2008
The HOA is the governing body of the condo. As a renter you might not have representation in the association but the owner of your unit does. The HOA will decide what types of insurance to carry beyond the required hazard insurance from the lenders on each loan.
The insurance that the HOA decides to buy will cover the complex and the owners of the units. You should have your own insurace to cover liability inside your unit and your contents.
When I was a construction project manager one of the jobs we did was the insurance repairs from a fire. The building was repaired but the family that lived there lost all their clothes and everyting else because they didn't have thier own coverage. The damage was from smoke and water putting the fire out. The family got out safely but it was a tradagy for them fiinancially.
0 votes
Melanie Nard…, , San Francisco, CA
Tue Jun 17, 2008
Sally is always on top of everything! She is right that you should secure a renter's insurance policy. In condos, the individual owner needs to insure the interior walls of their unit ... the hoa insurance covers what is outside walls of the units. You are right that many, perhaps most, of our condo complexes do not cover earthquake ... and I've also read that more than 67% of California condo associations do not have appropriate reserves. Which means this is something to look into when you are buying. If your building were destroyed, as a renter, it would depend on how your lease is written as to what recourse you may have with your landlord. You could ask someone like Dan Borenstein ... he's a great attorney for tenants.
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CJ Brasiel, Agent, San Jose, CA
Tue Jun 17, 2008

It very much depends on the type of insurance and coverage your complex purchases. A "master plan" insurance policy will provide coverage of the portions damaged by fire or earthquake (or other natural disaster types). If there is no master plan of insurance, each individual unit would be held responsible for completing repairs and/or rebuilding. If a majority of the units were affected, a special assessment could be instituted by the HOA to cover cost not covered by insurance to repair and/or rebuild. If your complex has a master plan there still may be deductibles due by each individual owner.

Lenders tend to want to see a master plan policy in place. The property value is more protected in case your neighbors unit has a fire but has infiltrated your property.

Here are a couple of web sites with more details.…

Of course, anything can become a legal matter once the dust settles but most HOAs are working to protect the value of the property.

Hope this helps.
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Lisa Cartola…, Agent, Oakland, CA
Tue Jun 17, 2008

There are different types of insurance. Earthquake insurance is a separate insurance policy and is not included in most insurance policies. Earthquake insurance can be very pricey and not a lot of people have earthquake insurance.

When living in a condo complex the HOA will have a policy to cover liability issues. (example someone tripping and falling on the front steps). The HOA should be able to provide information regarding the policy and coverage for the condo complex.

For each individual condo anyone who has a mortgage is required to meet CA minimum standards for hazard insurance. This will cover the condo interior fixtures and if there is a leak from an upper condo into one below, these damages are typically covered by insurance. Policies can vary depending on level of coverage.

You as a renter should have a rental policy that will cover you and your belongings. That way if there is a fire and everything you own goes up in flames, you can have those items replaced. This still does not cover damage by earthquake.

I would highly recommend you contact an insurance broker who can do a better job explaining to you the ins and out of the different types of insurance. I am not an expert in the area of insurance and talking with someone who knows the topic in and out would be a very good idea to have your questions answered in more detailed and specific terms.

I personally use Ken Bullock of State Farm and have found everyone in the office extremely helpful. (510) 658-9616

Good luck!

Lisa Cartolano
Alain Pinel Realtors

Check out my blog Real Estate News Without The Schmooze at
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