How to determine your HO-6 coverage

In CAM Library, Construction, Florida Hurricane Insurance, Insurance Appraisal by Patricia Staebler

Recently I was asked to appraise a high rise condominium building and as usual I met with representatives of the board to discuss issues about the subject property. During the discussion I learned, that the board recommends their home owners which amount they should insure the interior build-out of their units. Asking, how the board determines the amount they explained they use the difference between the flood and the wind valuation.

Let us get the definitions straight for better understanding:

For the Wind/Hazard valuation, only the envelope of the building, consisting of the walls, doors, windows, slab, roof and a certain amount of plumbing and electric as well as the drywall will be included.

For the Flood valuation we value all of the above plus the foundation of the building and the interior build-out consisting of cabinetry, wallpaper, paint, base boards, fixtures, etc.

The board of that condominium association deducted the Wind/Hazard value from the Flood value, divided it by the numbers of condo units and recommended this amount to be used for the HO-6 insurance.

THIS IS NOT THE WAY TO DO IT, and here is why:

The interior build-out of a condominium building at the time of construction costs the developer much less (per unit) than the interior build-out of a single unit. You have to insure the interior build-out of your condo unit in a single case scenario. Just imagine, your unit would be destroyed in a fire and you have to rebuild the entire interior build-out from scratch. This will cost much more than the build-out during the main construction of the building.

Therefore you should sit down with your insurance agent and discuss with him/her how to insure your unit in the correct manner. Do not forget to include improvements you might have made to your unit, for example: Enclosure of a screened porch, replacement of low grade carpet with good quality floor cover like wood, ceramic tiles or a designer carpet, replacement of the original “formica” kitchen with all-wood cabinets and stone countertops, upgraded fixtures and appliances, updated bathrooms, etc. Collect invoices for the upgrades you have done in your unit and present them to the insurance agent. Point out all upgrades and renovations you had done in the recent past. if you are not sure about the value of your interior build-out, you can hire an appraiser who is specialized on construction or you can ask a general contractor to give you a formal bid. Make sure to hire state-licensed contractors to comply with state law.

Does your HO-6 include all your interior upgrades?

Always keep in mind, that the condo association insures only the original interior build-out, which is usually as old as the building itself, unless stated otherwise in your condominium declaration. Who really likes to read that often 70-page long document? But for your own sake you should read your condo declaration to know what you have to include in your HO-6.

Also: insurance quotes are free! Always get at least three quotes from three different insurance agencies. Each agency will have different insurance carriers available and you might be surprised to find vast differences in policies.

As always, feel free to comment or call/email with questions you might have. I am here to assist you with all your concerns and if I cannot find the answer I will refer you to the correct professional who will be able to get you the answer you need.

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