Why the Surfside Miami condo collapse might not be covered by insurance

On June 24th the Champlain Towers South collapsed in the middle of the night killing 98 people

Some condo owners are still waiting on their insurance checks

You would think an insurance company after a tragedy like this would be quick to compensate any condo insurance policyholders but that is not the case

The main reason is not all claims are covered under an insurance policy

Collapse is covered but it depends on the Why

Why did the building collapse?

When a claim happens it is assigned to an insurance company claim representative to review the policy and determine that coverage will apply

An insurance policy will pay for “accidental direct physical loss to covered property involving abrupt, entire collapse of a building structure or any part of a building structure.”

BUT

The policy will not pay for any “earth movement, earthquake, erosion or movement from improper compaction or excavation”

or the policy will not pay for any “conduct, act, failure to act, or decision of any person, group, organization or governmental body whether intention, wrongful, negligent or without fault”

Investigators are still trying to determine the cause of the collapse and this could take years

Why your Condo Insurance policy does not cover your loan

When you buy a condo you don’t buy a condo insurance policy for the purchase price

You buy what is called the “sheetrock in”

The Condo association would have an insurance policy for rebuilding the entire building including your unit but only the exterior and interior framing of the building

Your condo policy would pay for the sheetrock and interior build out of your condo unit

The combination of the Condo Association policy and your individual Condo Insurance policy would cover your loan amount

The problem with Surfside Condo Insurance policy?

The Surfside Miami Condo building is under-insured

The building had 136 units and was insured for only 30 million

That is $220,588 insurance payout per unit owner

What if you bought the condo for 700,000?

Lawsuits and investigation into the cause of collapse will prevent the condo building from being rebuilt for years and more than likely never rebuilt

So you carry a 700,000 mortgage on your condo and you have a condo policy that does not cover your mortgage

You still owe your mortgage, have no place to live (if it was your primary home)

Your condo policy would provide additional living expenses but it is limited

I’m not sure if this type of event has ever happened in the United States but if you are buying a condo you need to make sure you are properly protected when a claim happens

The combination of the Condo Association’s insurance policy and your Condo unit insurance policy should be reviewed by an insurance advisor to make sure future claims compensate you

With the rising costs of building materials most property owners are now under-insured

An annual review of your homeowners insurance, rental property policy and condo insurance should be reviewed to determine you still have the right coverage