With spring comes an increased chance of rain in many parts of the United States. As intense inclement weather – and the subsequent damage that comes with it – becomes increasingly common in many areas, it’s more important than ever to ensure that your HOA is properly covered. Today, we’ll cover everything you need to know about flood insurance.
Are we required to obtain flood insurance for our association?
We recommend you check your governing documents. If your bylaws or another document stipulates the HOA possess flood insurance at all times, then you will need to have flood insurance. If your association resides in a flood zone, your city, county, or state may also require you keep up to date with your flood insurance policy.
If you live in a flood zone, obtaining flood insurance is highly recommended, and, as we’ll discuss below, likely required.
Why did the insurance company not approve our flood damage claim when the association’s pipes burst in our clubhouse?
Flood damage and water damage are two different types of damage in the insurance world. Flood insurance is designed for damage related to the effects of rising water. Damage caused by water in any other circumstance is not covered under flood insurance. Even rain damage will not qualify under a flood insurance policy, unless two or more acres of adjacent property have sustained rising water damage.
Can we be held personally liable for not acquiring the right flood coverage?
If your association is at high-risk for flooding and you do not obtain the right type and amount of insurance, then you may be held financially and legally liable for any flood damage that occurs.
Keep in mind that failure to procure insurance is not covered by most D&O policies, and, as such, boards are particularly vulnerable to this type of claim.
How do we know if our coverage is adequate?
Associations come in all shapes and sizes and have different risk levels. Check with an insurance broker who specializes in HOAs to ensure that your coverage level is right for you.
Are there any other ramifications to not obtaining flood insurance?
Depending on where your association is located, it may be impossible to secure loans for capital improvements, particularly if you live in a flood plain.
What’s the most affordable way to obtain flood insurance?
While flood insurance is one of the most costly forms of insurance to obtain, sourcing your insurance through the private flood market rather than through FEMA will generally be the most cost effective solution.
How does flood insurance work in a condo association?
Flood insurance for condo associations is usually required in the governing documents to maintain flood insurance for the common structures and shared areas, if they are located in a flood plain. The determination for flood risk is the same for condo owners and single-family residences. While it may seem unfair for condo owners on the top floor to help pay for flood insurance, all unit owners are partially responsible for all common areas and shared spaces, and structural integrity of the entire building is important whether the condo unit is on the ground floor or the top floor.
Will not having flood insurance for our condo affect condo owner’s ability to sell their condos?
Yes, especially if the property is located in a flood risk zone. Lenders will not approve loans without proof of sufficient flood insurance.
We hope these answers have cleared up any lingering questions you have. If you have any more questions regarding flood insurance, or wish to procure flood insurance for your association, please reach out a Blue Lime agent, and we’ll be more than happy to assist you.
What coverage is available for condo and single family HOAs?
Generally, only buildings with four enclosed walls are eligible to have flood coverage. The commonly owned outdoor property is not eligible to be covered, such as playground equipment, fences, etc.