Condo Insurance

Fannie Mae & Freddie Mac have specific coverage and endorsement requirements for the Condominium Home Owner Association’s Master Insurance Policy to be able to warrant condominium projects under both full review and limited review methods.

Both Full and Limited Review methods must meet the following coverage and endorsement requirements:

  1. Property/Dwelling coverage must document Replacement Cost Coverage, Extended Replacement Cost, or Guaranteed Replacement Cost Coverage.  Any of  these three are acceptable.
  2. The deductible amount for the Property/Dwelling coverage must be stated and may not be more than 5% of the total Property/Dwelling coverage.
  3. Confirm the total number of units in the project covered by the policy
  4. Confirm Inflation Guard Endorsement is included, if available
  5. Confirm Building Ordinance or Law Endorsement is included.
  6. Confirm Boiler and Machinery/Equipment Breakdown Endorsement.  This is required if the building has central heating or cooling.
  7. Document the number of days required for notice of cancellation or changes to the policy.  Advance notice must be a minimum of 10 days.
  8. Document renewal for the policy if the policy is expiring in the next 30 Days
  9. The certificate of insurance (or ACORD form) must be signed by an authorized agent for the insurer.  An email from an authorized agent for the insurer is acceptable if it confirms all information on the COI is accurate and it is against the insurer’s business practice to sign the COI.
  10. The certificate of insurance must include the client’s name and First Home’s mortgagee clause.

The following are additional master insurance coverage and endorsement requirements for the Full Review method:

  1. Liability Coverage of $1 million ‘per occurrence’ with severability of interests/separation of insureds as an endorsement
  2. Fidelity Bond (a/k/a Crime or Employee Dishonesty) is required if the condominium project has greater than 20 units. The amount of coverage required is equal to three months of the annual budgeted common assessments.   If the HOA uses the services of a managing agent then the HOA must confirm that the managing agent is covered as additionally insured.   If the managing agent is not covered under the HOA’s policy but documents that they carry sufficient fidelity on their own, then the project is eligible to Freddie Mac.

IMPORTANT TO NOTE: If the condo association master insurance policy includes coverage for betterments and improvements, then the buyer does not need to acquire H06 coverage for the interior of their condo.  However if you wish to cover your personal property and liability, you’ll want to purchase an H06 policy regardless.

Questions?  [email protected] or 240 479 7658

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