Understanding Your Insurance Policy's Fine-Print What You Need to Know about Riders

The catastrophic and tragic effects of the tornadoes that ripped through Oklahoma this past May resulted in 23 deaths and nearly $2 billion in damage. Natural disasters like these are on the rise, and serve to underscore the importance of having appropriate insurance policies in place—for both individual homeowners and homeowners associations alike. And while board members have a good grasp of common insurance coverage such as homeowners, liability and umbrella, there are other specialty insurance policies to consider.

“The biggest issue we see, especially in Chicago, is the underinsurance of older unique buildings. Insurance companies can generally penalize an association when the building is underinsured which is referred to as coinsurance,” says Jon Schildt, managing principal of Chicago-based Calculated Risk Advisors, LLC, a boutique risk consulting firm and professional liability insurance brokerage. “If a building is underinsured and property damage occurs, owners are often shocked when they find out that the damage will not be fully reimbursed.”

When looking into specialty insurance policies, it is often recommended to revisit existing policies to guarantee that all the proverbial ducks are in a row.

“Often when we take over buildings, we notice that the legal name of the condo building is not the same name as the insured party. If it’s not the exact legal name, insurance companies may have a way out of covering a loss which would obviously be a big problem to the board and the owners,” says Keith Hales, president of Hales Property Management, Inc. in Chicago. “The board should review the policy with an insurance consultant and their property manager to ensure that they are covered properly.”

Going Green?

In recent years there has been a growing trend towards buying “green” specialty insurance. More and more boards are looking into these policies; however, not all industry professionals agree with this approach.

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