Condo Owners Are Advised to Buy Own Insurance : Recovery: Too often, residents rely on the association’s coverage, which may fall far short of what’s needed in a disaster.

It pays to have the right insurance.

Thousands of condo owners in the San Fernando Valley and Ventura County have learned that lesson as they continue their struggle to recover from last year’s Northridge earthquake.

Lynette Findlay fared well after the quake because she bought a special insurance policy that protected her from having to pay a $4,000 assessment that her Burbank condominium association imposed on each of its condo owners after last year’s earthquake.

Fortunately, Findlay had already bought the insurance known as earthquake loss assessment coverage and liability loss assessment coverage. While most of her neighbors had to come up with the $4,000 out of their own pockets, “It didn’t cost me a penny,” said Findlay, who is also president of the greater Los Angeles chapter of the Community Associations Institute, an association of associations.

The failure to pay a condo assessment can result in late fees, penalties, the placement of a lien on the condo owner’s unit, or even foreclosure by the condo association. Having the right insurance coverage can help condo owners avoid these problems.

Many condo owners rely on the insurance carried by their associations, and they don’t get separate policies to cover their individual condo units. Those who do buy their own policies often don’t know what to get, said Timothy Cline, head of the condo division of Robert W. Little Insurance Agency Inc. in West Los Angeles.

“Many people have bought insurance in good faith and found out they weren’t as well-insured as they thought,” Cline said. “Insurance is very confusing for many condo owners.”

To simplify things, here are the additional types of coverage recommended for condo owners:

* Liability loss assessment coverage: If a homeowners association suffers a liability loss (because someone, for example, was injured at the pool), this type of coverage will cover any condo owner from special assessments imposed by the association because its own insurance policy was insufficient to pay for the damage. Liability loss assessment coverage costs only about $12 a year for $50,000 worth of coverage.

* Earthquake loss assessment coverage: This is similar to liability loss assessment coverage, except that it kicks in when an association imposes a special assessment for fixing earthquake damage because the condo association’s own earthquake policy has a large deductible or because the association was uninsured. The cost of this coverage is about $1.20 for every $1,000 of coverage. The cost to Findlay’s neighbors to avoid the $4,000 assessment by their Burbank association would have been less than $5 a year. It’s generally worth buying about $25,000 to $50,000 worth of this coverage.

* Loss of use: This reimburses condo owners for the expense of finding a new place to live when their unit is uninhabitable. This coverage is generally part of basic individual real property coverage.

* Premises liability: Though condo associations carry premises liability for the common areas, individual owners need to have their own liability insurance in case someone slips and falls or gets hurt within their condo. Expect to pay about $25 a year for a $300,000 policy.

* Real property coverage: Though the so-called master policies of condo associations do cover condo unit interiors, these master policies will restore a unit only in a very basic way. Condo unit owners who want particular wall, window and floor treatments replaced need their own policies. Insurance companies recommend about $40,000 to $50,000 in real property coverage for condo owners. The cost is about $3 for every $1,000 of real property casualty coverage.

* Extended coverage: In addition to basic earthquake insurance, there is extended coverage. The three most common forms of extended coverage are for structural engineering costs, demolition costs and reimbursement for any upgrades that need to be made to a damaged building because of upgraded ordinances. Most policyholders don’t opt for this extra coverage and not all condo insurance policies offer it, but it’s worth asking about.

“Maybe 25% of condo owners have liability loss assessment coverage and even fewer have earthquake loss assessment coverage. People don’t understand why they need it or they don’t know it’s available,” said condo attorney Daniel C. Shapiro, a Northridge resident and partner at the West Los Angeles law firm Wolf, Rifkin & Shapiro. “The one time that an association makes a special assessment it will be well worth it to have the extra insurance,” Shapiro said.

Before buying a condo, potential buyers have the right to review condo association’s financial reserves to check out what’s really in the coffers. Buyers should ask if there’s been a statement by the board anticipating the need for one or more special assessments. Also, it may be advisable to review minutes of board meetings from the past six months.

Finally, buyers shouldn’t be bashful about knocking on doors and asking residents questions about their condo complex.

For more information: The insurance industry’s Western Insurance Information Service offers several insurance-buying brochures that consumers can receive free by calling the group at (800) 397-1679. Another source is the National Insurance Consumer Helpline at (800) 942-4242. Consumers may also call the California Department of Insurance, which offers licensing backgrounds of insurance agents and other consumer information at (800) 927-HELP or (213) 897-8921.