General Article

Co-Op Apartment Damage: Who Should Carry Insurance

Co-op apartments represent a unique method of property ownership more commonly found in large cities such as New York or New Jersey. This type of community is notably different from a condominium association because co-op members own shares in the property rather than owning the property itself. So there can understandably be some confusion about who is responsible for personal and/or property liability when issues arise.

Co-Op Master Policy

A co-op operates like a business, and therefore carries an insurance policy specific to the business and building structure, though the specifics can vary from state to state. In this regard, the master policy for co-op insurance in New Jersey would be similar to the policy for a condo association and would cover things such as external space around the building, public spaces inside the building including common rooms and hallways or elevators, as well as the exterior building structure itself.

Additionally, that kind of policy would likely cover any claims brought against the directors of officers of the co-op for their behavior, negligence, or discrimination. In terms of liability the physical location, the master policy is typically more geared toward accidents or incidents that happen in the common areas or grounds rather than inside your apartment.

Co-ops have a variety of ways to limit such kinds of liability, which in turn helps to limit your own personal liability as well, but usually co-ops will insist that you have your own insurance policy to reduce the potential for claims on their policy. The co-op board might perform extensive screening of potential co-op candidates and may even perform a tenant credit check before approving a new co-op member to reduce the overall risk to the other members and to the building. The co-op also may enforce a variety of building policies that may seem onerous but are intended to mitigate risk, which ultimately protects the investment of co-op members as well.

Individual Owner Policy

Regardless of what policies and rules a co-op might carry, it is likely that various issues inside your unit may not be covered by the co-op policy. It’s possible there could be some overlap in issues that affect multiple units such as smoke or water damage from a fire in another unit, or vandalism throughout the building, but in general if it’s inside your walls, you’ll be paying for it. This includes loss or damage to personal property from things such as fires or damage to other units that directly affects your unit as well.

This is especially important to know if you have made extensive renovations to your apartment, including high-end fixtures, flooring, or appliances, although the Insurance Information Institute notes that master policy coverage can vary between co-ops. Sometimes banks that finance a co-op membership can also require a minimum amount of insurance coverage as well, especially if any of that financing was also used for renovations.

Keep in mind that some things, such as earthquakes and floods (even those caused by water pipes or fire sprinklers rather than hurricanes), might require separate policies or additional riders, as well as big-ticket personal property items like jewelry, antiques, or artwork. If you have any type of home-based business, you may need extra coverage for both liability and the equipment your business requires; it’s always important to read the fine print to know what is and is not covered before disaster strikes.

If you plan to sublease your co-op apartment, keep in mind that you might need additional coverage and make sure you check all rules and stipulations before signing a lease. Whether you find it’s a board or bank requirement or not, having your own individual policy is an important safeguard that ensures the continued livability of your co-op unit in the aftermath of a disaster.