Do Condo Owners Really Need Additional Insurance?

The ongoing complete reconstruction of building 6 at the Gatlinburg Summit Condominiums has reminded me that although condominium home owner associations provide some insurance these policies don't cover everything. Owners of units at The Gatlinburg Summit building 6 were total losses when a fire completely destroyed the structure on April 16, 2014 and everything in it. After lots of work to remove the charred remains and months of insurance investigation work, the rebuilding is now well underway. Although the building shell has been rebuilt, it won't be restored to its pre-fire condition. The exact details are still under some degree of uncertainty but it is a certainty that owners of these units will have a new building shell but they won't be fully restored. At a minimum the furniture and decor items won't be replaced or paid for by the HOA's insurance. It is possible that much more won't be replaced and here is why.

The insurance that the The Gatlinburg Summit Condominiums home owner's association had, like most condo development's insurance policies, only covers from the drywall out. The exterior shell, including the roof, and all of the systems behind the walls like the plumbing and electrical systems are covered and will be replaced. On the other hand, electrical fixtures, plumbing fixtures, furniture, and the appliances won't be covered at all. This will be a very considerable expense for these condominium owners that I estimate will likely be $10,000 for even the smallest units and much more for the larger ones. Another significant challenge is that a unit that isn't finished will require potential buyers to pay cash, as these partially finished units won't be financeable.

It is very important for all condominium owners to realize that although this type of loss rarely happens, it can and does sometimes occur. When it does, condominium owners without additional coverage will have to fund the expense of replacing their condominium's contents out of pocket. Review your policy details with your insurance agent and know what is and isn't covered by the HOA's policy and by your own policy. This is a truly important lesson for any condominium owner!

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