Condominiums in the state of Alabama are governed by the Alabama Uniform Condominium Act. Section 35-8A-313 of the Act specifically relates to insurance requirements for condominiums. Condominium associations are required to maintain master insurance policies, but individual unit owners are not required to obtain their own insurance policies for their units.
The Act states that a condominium association shall maintain:
A(1). Property insurance on the common elements insuring against all risks of direct physical loss commonly insured against or, in the case of a conversion building, against fire and extended coverage perils. The total amount of insurance after application of any deductibles shall be not less than the greater of 80 percent of the actual cash value of the insured property at the time insurance is purchased;
A(2). Liability insurance in an amount determined by the board but not less than any amount specified in the declaration, covering all occurrences commonly insured against; and
B. In the case of a building containing units having horizontal boundaries (a multi-story building) described in the declaration, the insurance maintained under subdivision (a)(1), to the extent reasonably available, must include the units, but need not include improvements and betterments installed by unit owners.
If the insurance described above is not reasonably available, the association must notify all unit owners. Each unit owner is an insured person under the master policy with respect to liability arising out of his or her interest in the common elements or membership in the association.
A unit owner is permitted to obtain insurance for his or her own benefit, but is not required to do so under the Uniform Condominium Act. The Act does state, however, that if at the time of loss the unit owner has an insurance policy that covers the same risk as the association’s policy, the latter provides the primary insurance. The insurer is required to waive its right to subrogation under the association’s policy against any unit owner or other member of the household.
Although Alabama law requires condominium associations obtain insurance for the condominium building as a whole and for the individual units when they have horizontal boundaries, when the insurance policy covers the unit owners, unit owners may still want to consider purchasing insurance policies to cover their possessions, any improvements or betterments personally installed, or any risk or loss not covered by the association’s policy.