Insurance is one of those necessities of life that we avoid thinking about until a problem occurs. At that point, we realize that the details of our policies do matter and that we probably should have spent more time reviewing them before it was too late.

Fortunately, many insurance providers are knowledgeable about the types of coverage that condominium associations may purchase and can advise your association as to the pros and cons of those options.

From the legal perspective, we begin our look at condo insurance by referring to the Virginia Condominium Act. Section 55-79.81 of the Act states that condominium instruments (the condominium declaration and bylaws and all of their exhibits and amendments) may require a unit owners’ association (or its board of directors or managing agent, acting on behalf of the association) to obtain (a) a master casualty policy covering either the full replacement value of the condominium structure(s) or of just those structures that comprise all or part of the common elements; (b) a master liability policy, in an amount the instruments specify, covering the association, the board of directors, the managing agent (if any), agents and employees, unit owners, and non-resident occupants; and (c) such other policies as the condominium instruments may require, such as liability coverage for association-owned vehicles. The only insurance policy that the statute requires every association to obtain and maintain is a blanket fidelity bond or employee dishonesty policy insuring the association “against losses resulting from theft or dishonesty” by the association’s officers, directors, employees, manager, and manager’s employees in an amount (at least) equal to the lesser of $1M or the sum of the association’s reserves + ¼ of the association’s aggregate annual assessment. The minimum coverage allowed is $10,000. Under the statute, whenever an association changes its insurance policies, it must send notice to the unit owners since these changes likely affect owners’ decisions about personal policies and may affect their fulfillment of covenants in their mortgage loans. Note that there is no statutory requirement for unit owners to insure their units; many condominiums require it through their condominium instrument provisions. Even if not required, unit owners often choose to purchase such coverage or may be required to do so by a lender.