Community insurance: common mistakes that reduce compensation

Introduction

When a loss occurs in a homeowners’ association — a flood, storm damage or a fire — many owners realise they do not clearly understand what the community insurance actually covers.

Flooded garages, damaged lifts, inaccessible common areas, affected commercial units…
And then the problems begin:

• reduced compensation
• disputes about what is considered common property
• underinsurance
• policies that were poorly structured from the start

In community insurance, a single mistake affects every owner.

What community insurance usually covers (and where problems start)

In principle, community insurance covers common elements, such as:

• the building structure
• entrances, staircases and access areas
• communal garages and storage rooms
• lifts
• shared installations

In practice, problems arise when:

• reconstruction values are too low
• communal contents are undervalued or almost non-existent
• common and private elements are poorly defined
• patios or areas of private use suffer damage

These issues have a direct impact on compensation.

Floods, water damage and fires: the most complex claims

The most problematic claims we see in community policies involve:

• flooding and severe storms
• water damage affecting common and private areas
• fires impacting structural and shared installations

In these cases, it is common to find:

• lifts significantly undervalued
• electrical installations poorly assessed
• garages incorrectly defined
• entire damage sections excluded

Incorrect insured values: the root of many problems

One of the most frequent issues is that the reconstruction value of the building is below its real cost.

This usually happens because:

• values are not updated over time
• realistic reconstruction modules are not applied
• complex elements such as lifts or garages are underestimated

The result is underinsurance and the application of the proportional rule.

Communal contents: the most overlooked coverage

In many community policies, communal contents are minimal or almost absent.

However, communal contents may include:

• lift machinery
• electrical panels
• ventilation systems
• automatic doors
• shared installations

When these elements are not properly insured, compensation is significantly reduced.

Common areas, patios and private-use zones

Another frequent source of conflict is the definition of:

• patios for private use
• terraces
• rooftops
• common areas with exclusive use

Misclassification often leads to:

• denied claims
• reduced compensation
• incorrect handling of the loss

When community insurance combines with individual policies

Many claims do not affect only the community.

For example:

• commercial units affected by common-area damage
• fires starting in private areas but impacting shared elements
• floods affecting garages and vehicles

In these cases, proper coordination between the community policy and individual policies can make a substantial difference.

When community insurance has saved uninsured commercial units

In some of the most complex cases we have handled, the main issue was not underinsurance, but the fact that the affected commercial unit had no private insurance at all.

In certain situations, by correctly analysing:

• the origin of the damage
• the definition of insured common elements
• and the scope of the community policy

we were able to activate community coverage and avoid a total loss.

Although this is not applicable in every case, it has made a decisive difference for some businesses.

Conclusion

Community insurance is one of the most complex and least understood types of insurance.

Incorrect insured values, missing contents, poorly defined common areas and lack of coordination with individual policies often result in communities receiving far less compensation than they should.

A technical review can change the outcome.

Has your community suffered a loss?

We review community policies and compensation calculations for floods, water damage and fires.

Sometimes, there is still room for improvement.

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