The HO6 Condo Unit Owner s Insurance CONUNDRUM

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1 The HO6 Condo Unit Owner s Insurance CONUNDRUM Co.nun.drum A confusing and difficult problem or question Presented by: Greg L. Waltz, President (954)

2 Hurricane Irma Update Number of claims reported in Florida as of September 30th: 661,957

3 Homeowner companies Homeowners Insurance Companies

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11 Total Damage: $138,080.00

12 EXCLUSIONS NESTING OR INFESTATION, OR DISCHARGE OR RELEASE OF WASTE PRODUCTS OR SECREATIONS, BY INSECTS BIRDS, RODENTS OR OTHER ANIMALS

13 Special Assessment

14 Am I required to have a Condominium Unit Owners Policy (HO-6)? There is no Florida Statute requirement. In 2008, there was a change to the law that did implement mandatory HO-6 Unit Owner Policies. Repealed in 2010.

15 Chapter 718 Florida Statutes The Condominium Insurance Act (11) What is not covered by the Master Policy: The coverage must exclude all personal property within the unit or limited common elements, and floor, wall, and ceiling coverings, electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments, including curtains, drapes, blinds, hardware, and similar window treatment components, or replacements of any of the foregoing which are located within the boundaries of the unit and serve only such unit. Such property and any insurance thereupon is the responsibility of the unit owner.

16 Insurance Responsibility of Unit Owners per Statute Interior paint Carpet, tile, vinyl Ceiling tile / popcorn Interior lights Ceiling fans Exhaust fans Range Built-in microwave Dishwasher Refrigerator (if building property) Garbage disposal Water heater Water filtration systems Kitchen cabinets Bathroom cabinets Laundry room cabinets Counter tops Curtains & blinds & hardware Including Upgrades and additions

17 Responsibility to Insure vs. Responsibility to Maintain Example: Air conditioning Units

18 Developer Installed vs. Unit Owner installed Example: Lanai s-who is responsible to insure?

19 Refer to Chapter (f)1 Every property insurance policy issued or renewed on or after January 1, 2009, for the purpose of protecting the condominium must provide primary coverage for: 1. All portions of the condominium property as originally installed or replacement of like kind and quality, in accordance with the original plans and specifications. 2. All alterations or additions made to the condominium property or association property pursuant to s (2). (Material Alterations)

20 How much insurance do I buy? How much personal property contents insurance $. How much on all those items that Florida Statutes say unit owners are responsible for $ additions and alterations/improvements and betterments.

21 THE FLORIDA CONDOMIUM ACT CHAPTER 718 FLORIDA STATUTES (as related to insurance) VS. YOUR ASSOCIATION DOCUMENTS

22 Loss Assessment Coverage Florida Statute requires HO-6 policies to include at least $2,000 in Loss Assessment Coverage. Many insurance companies will sell you more than $2,000. Ask your agent buy as much as you can it s dirt cheap.

23 Additional Living Expense (ALE) If damage to your home prevents you from you living there. Pays for cost to live elsewhere while your home is being repaired. Amount of coverage is 40% of personal property contents limit of insurance. Example: Contents/Personal Property Limit on your policy is $50,000 (ALE) 40% would be $20,000.

24 Personal Liability Protects you against a claim or lawsuit for bodily injury or property damage. Example: a neighbor trips and falls in your home and sues you. You re on the golf course and you hit someone with your club or ball. Limits of insurance recommended: $300,000, $500,000, $1,000,000

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27 4.5 million people bitten each year. 18,123 dog bite claims turned in to homeowners insurance. $33,230 average cost of claim. Check your policy, ask your agent!!! Many Homeowner s policies exclude canine coverage. Many Homeowner s policies limit coverage.

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32 Golf Carts and your Homeowners Insurance Some Homeowners policies will insure for liability. Some will not Some Homeowners policies will insure for collision /comprehensive. Some will not Ask your agent what your homeowners policy will or will not cover.

33 Golf Carts and your Personal Auto Insurance Another option is to add golf cart to your auto policy if your carrier permits. Ask your agent if auto carrier will provide both liability and collision/comprehensive.

34 The Best Option May Be Buy a separate policy for golf cart covering both liability and collision/comprehensive VERY INEXPENSIVE. If your golf cart has a speed of 25mph or greater, it is classified as a low speed vehicle (LSV). Tell your agent to make sure coverage meets state requirements.

35 Gary Gentzler

36 IDAHO Top 10 states with the Lowest HO premium

37 Top 10 states with the Lowest HO Premium 1. Idaho $ Oregon $ Utah $ Washington State $ Wisconsin $ Nevada $ Delaware $ Arizona $ Maine $ Ohio $771

38 Top 10 states with the Highest HO Premium 10. Alabama $ Connecticut $ Massachusetts $ Rhode Island $ Kansas $ Mississippi $ Texas $ Oklahoma $ Louisiana $765

39 Top 10 states with the Highest HO premium FLORIDA $2,038

40 Do I need Flood Insurance? The short answer Yes, everyone in Florida lives in a Flood Zone and should have Flood Insurance. Stay tuned and save this date: January 11, 2018 to learn more.

41 Your Homework Assignment Make sure you have enough insurance on content/additions alterations. Buy as much Loss Assessment as your insurance company will sell you. Dog owners check your policy for limitations/exclusions. Golf Cart owners make sure you have coverage somewhere. If your home is in a Trust, review coverage with your Agent.

42 Resources Greg Waltz: Florida Department of Financial Services Click on Homeowners Insurance A Toolkit for Consumers.

43 HOW DO I INSURE MY HOME/CONDO IF MY HOME IS IN A REVOCABLE LIVING TRUST? Presented by: Gary L. Gentzler, CLU, AAI, CPIA, LUTCF

44 Disclaimer Welcome to my Daddy s Presentation. The views and opinions expressed in this presentation are not necessarily those of my Daddy or any others presenting today,

45 Personal Trust and the HO Policy 1.) While trusts have been around for years, there has been an increasing use of them for tax and liability purposes. 2.) Only recently has the Insurance Industry begun to address insurance issues in the personal lines area. 3.) What is the primary problem with the using the traditional homeowners to insure a trust? 4.) The homeowners policy is designed to insure individuals not LLC's corporations and trusts.

46 Policy Language vs Personal Trust Document. 1.) Primary problem with using traditional homeowners policy to insurance a trust is HO policy is designed to insure Individuals only!!!!! 2.) The Policy language is such that, if the named insured is a trust (particularly one that is not a natural person) there will most likely be major coverage gaps. 3.)Since coverage applies largely to you (named insured and resident spouse) and family members, if the trust is not a natural person, then it cannot have a spouse or family. 4.) Also, the homeowners program generally requires that a named insured own and occupy the dwelling, something not possible if a trust owns the home.

47 Foremost Concerns in any Trust Situation Should Be: 1.) Who owns the property? 2.) Who occupies the property? 3,) Establishing ownership and occupancy before a claim, will make it much easier at time of claim. 4,) It is important that the owner(s) and occupant(s) be protected for the appropriate property and liability exposures, 5.) Providing proper protection for all parties may require several policies to be in place, especially if occupants of the home are not married or related.

48 What constitutes a Revocable Living Trust? 1.) Grantor: The person(s) who owns the property establishes the Trust. Sometimes called Settlor or Donor. 2.) Trustee: Person who controls the assets of the Trust. 3.) Beneficiary: The person(s) who benefit from the creation of the Trust at the time of payout.

49 Is there a way I can Insure the Trust, myself and Family? 1.) Option#1 Write the policy in the name of the Trust and the person occupying the home. While not permitted by ISO rules, sometimes some companies deviate from ISO rules. This would be the best recourse. Not usually available. 2,) Option#2 Write the policy in the name(s) of the occupants and use the HO Additional Insured Endorsement 3.) Option#3 Provide a dwelling policy and premise liability for the Trust and use the HO-4 for the occupants. While the cost for insurance will be higher, this is likely the cleanest way to provide coverage for trust situation. 4.)Option#4 Utilized a Commercial Policy form for the Trust and HO-4. This option falls well within the ISO Rules.

50 Coverage under the ISO Homeowners 2000 Program 1.) Recognizing the pitfalls of homes/condos in the name of a Trust, ISO introduced a new endorsement. HO ) Has been in Florida since 12/91, 3.) Most times the insurance implications of this advise is not discovered until after the fact. That s when the insured comes to the agent and says, Here s what I did, so please cover me. Can I get Coverage under the HO Endorsement? A home in the name of a Trust is eligible for a homeowners policy if ALL of the following are met: 1.) Legal title to the residence is held solely by the trust. 2.) The Trustee, Beneficiary, and/or Grantor regularly reside in the reside in the residence. 3.) The residence premises is used exclusively for residential purposes.

51 Umbrella Liability Issues It s common to find personal umbrella policies in place for customers who put homes in the name of a trust. It s important to make sure that the appropriate underlying policies are in place so there is no gaps in coverage. Also of concern would be the Trust itself. Since the Trust is the one with the assets, it may be likely target of a lawsuit. Whether an insurance company would be willing to cover a trust under a personal umbrella is very rare.

52 Summary There are other way that homeowners can address the probate cost. Some use a Lady Bird Deed. You can use other estate planning too. Please consult you Attorney, CPA, Insurance Agent for details. Remember, when you are setting up your Trust, establish who owns the property and who occupies the home. Remember this statement NEVER RISK MORE THAN YOU CAN AFFORD TO LOSE!

53 Two case studies or common errors. The Anderson Trust. The White Trust