San José, Costa Rica, since 1956

On Insurance for Condo Apartments

More and more condo apartments seem to be springing up all over the place, particularly in the Pacific beach areas. How should they be insured? Three policies are available: Theft, Liability, and Fire and Natural Disasters.

Theft. A very difficult policy to claim against. There are lots of restrictive clauses and it only pays out if there is a break-in, so it often behooves people to spend their money on security – and, collectively, for an apartment complex, this makes sense. If someone wants to insure their belongings in an apartment, the starting point is an inventory list of all items in the unit, with the value of each item, as well as makes, models and serial numbers. Budget on roughly 1.5% per year,multiplied by the total value on the list.

Liability. This is important for complexes where time-sharing is customary. Costa Rica is not a litigious country, so only a small General Liability policy is advisable. It should be in the name of the condo association, and each owner should appear as a coinsured party. Liability premiums are determined by the National Insurance Institute (INS) on a case basis, depending on the risk and security involved. For example, pools and tennis courts add risk, but handrails and non-skid floors reduce exposure. Budget on a premium of about 1% of the coverage you wish to contract. And remember that, mostly, condos are registered in the names of Costa Rican corporations that have no assets that can be attached in foreign countries, so plan on a moderate amount of coverage.

Fire and Natural Disasters. The main risks covered are fire, lightning, wind, hurricane, floods, landslides, earthquakes, tremors, tsunamis and volcanoes. The rate depends on the number of floors, but budget on about 0.5% per year multiplied by the estimated cost of rebuilding – not on the market value of the units.

This policy must be in the name of the legal owner(s) of the property, so usually it is initially purchased by the developer, in his name. He insures as soon as he receives the units from the builder. As the developer goes selling the units, he should write letters to INS, asking it to segregate the respective units and providing the name and ID numbers of the new owners, and the units’ filial folio real numbers. When all the units are sold and have been segregated, the only parts not segregated on the policy are the common areas, which are, of course, no longer really the developer’s – they are common property (how’s that for stating the obvious?).

So at this point, the policy should be transferred into the name of the condo association, which becomes responsible for collecting from each owner his corresponding part of the premium. Prorating the premium is fairly simple – I have an Excel program that I would be happy to share (write me).

It’s not unusual for people to assume that, because there is a policy covering a condo complex, it’s not important to segregate the units as they are sold off.Wrong – it is super important! If there were a claim, before paying INS would verify that the policy (or the corresponding part of a policy) and the ownership of the damaged property were the same: if they weren’t, they wouldn’t pay. So if you own a condo, get on the case of your condo association, or, if it’s brand-new, the developer, and make sure your unit has been correctly recorded in your (or your corporation’s) name in the National Registry, and segregated on the Fire and Natural Disaster policy.


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