When you buy a new house, you already have so much paperwork that you need to do. With the enthusiasm of moving into your new abode comes the challenge of understanding the nuances of the maintenance of the common property; especially if you are in an apartment. As a first step, you need to acquaint yourself with the already established association. In the case of a new apartment, the builders would act as a pseudo-association. It helps to maintain the property until the complete handover. Here we look at the various insurance covers that need to be availed by the apartment owners association to ensure that any damage to the property or accidents to staff while on duty do not result in a huge outflow of maintenance funds.
Key Takeaways
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Legal Distinction: While an AOA has legal stature under state acts to enforce regulations, an RWA is primarily a welfare body; however, both share the burden of protecting maintenance funds from unforeseen losses.
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Common Asset Shield: Insurance should specifically target expensive machinery like lifts and generators, covering part replacement and maintenance costs that would otherwise result in heavy “one-time” levies on residents.
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Staff Welfare Mandate: Associations are increasingly adopting Group Health and Term Cover for direct employees (security, plumbers, gardeners) to provide a financial safety net for their families in case of injury or death.
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The Liability Gap: Accidents in shared spaces like swimming pools or playgrounds can lead to expensive third-party legal suits. Liability insurance protects the association’s corpus from legal fees and court-ordered penalties.
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Private vs. Common Demarcation: A clear boundary exists; the association insures the parking structure, but the owner must insure the vehicle. Similarly, while the association monitors fire safety, the cost of internal sprinkler repair usually falls on the flat owner.
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Risk Hedging: For associations in specific climates, specialized health plans covering seasonal or vector-borne diseases (like those common in monsoon) are becoming a strategic part of staff management.
The norms:
As a first step, we understand the difference between the Apartment Owners Association (AoA) and Resident Welfare Association (RWA):
- AOA is a voluntary body formed by the Apartment owners association. They undertake the responsibility of enforcing regulations and maintaining the amenities and building. They must follow the rules stipulated in the State Government’s Act. While a registered AOA has legal stature and enjoys a few benefits thereof; it is not mandatory to register the Apartment Owners Association.
- RWA is again a voluntary body where the residents of the complex consult with the governing body to decide on the rules, responsibilities, and roles. They are established solely for residents’ welfare. They are registered under the Societies Registration Act, of 1860. However, no legal authority is extended to RWA as part of their roles and responsibilities.
Additional Read: What types of properties can be insured under property insurance?
It is apparent that both these forms of associations have the onus of maintenance of amenities and prudently expending maintenance funds. This is to ensure that they do not incur any major expense due to damage or repair of the property or machinery. They also need to hedge the risk of accidental injury and death of employed staff.
Top 4 aspects you need to check for Insurance coverage:
These are aspects for which you need to consider insurance. Following are the types of insurance coverage that an association should seek whilst managing operations of a gated community.
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Cover common assets and equipment –
Property insurance needs to cover common assets used by residents of the community, such as the lift, generator, motor for the water tank, etc. Their regular maintenance is also important. You could check for insurance plans which offer to cover maintenance costs. Or any part replacement, which tends to be an expensive affair if one has to incur it as an out-of-pocket expense. Often, there is clarity regarding the maintenance charges as the association undertakes the AMC (annual maintenance charges) engagement. Thus, assessing the quantum of coverage required across assets becomes easier.
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Cover clubhouses, community halls, food cafes, parking –
Most apartments offer multiple entertainment benefits, such as clubhouses, which have indoor games, a swimming pool, a gymnasium facility, etc. Common assets cover the other assets within these facilities. There needs to be insurance for the building, including a clubhouse, community hall, cafes, parking, etc. The insurance is against natural calamities, fire, floods, etc. These would be under the coverage of insurance for immovable property.
While the house needs to be covered by the individual owner, the car that is parked in the parking space needs to be covered by the owner, and the parking space and the ancillary benefits such as the ones mentioned above have to be covered by the association.
Association also provides awareness to individual homeowners about insurance coverage and protection against fire, flooding, perils, theft, and burglary, so that there is insurance coverage for the contents within their house as well. They provide a clear demarcation of the property, which is common to all and which is private property. The responsibility of the association is limited to common assets.
However, they do undertake periodic reviews of safety aspects like the working condition of sprinklers and fire alarms installed in individual houses. They need replacement as and when it is necessary. Often, the cost incurred is levied on the house owner since the installed asset is within the premise of the owner’s private space.
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Cover for Staff Apartment owners association–
Most apartments employ extensive security personnel. The safety aspect is one of the key highlights of staying in an apartment. They engage other staff as well, such as plumbers, electricians, carpenters, office personnel, housekeeping staff, and gardeners. Some of these persons may be working online or offline. Typically, plumbers and electricians work on a regular basis to ensure that there is no delay in adhering to the emergency aspects or services. It is the association’s responsibility to provide appropriate health coverage to this personnel.
You can avail of a group cover for all the personnel employed directly by the association. It is important to note that there are apartments that engage most of this personnel from a third-party agency. In this case, the company that employs them would undertake the responsibility of providing health coverage. Although not mandatory, many associations have started providing term cover for the staff directly employed by them. This is to ensure that upon the sudden death of the staff, the family does not suffer a huge financial impact. There are associations, especially in regions of extreme climate, which undertake health coverage for staff with a specific focus on seasonal diseases. For example, specific health plans cover vector-borne diseases and common occurrences during monsoon season.
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Liability insurance covers:
Accidents can happen in playgrounds, pools, etc. However, such unforeseen accidents may lead to considerable losses that a third party might sustain. Any accident that occurs on the premises needs to be under the coverage of the plan, irrespective of the reason. It is always better to avail of liability insurance which will ensure that there is enough third-party coverage.
Often, there are legal suits levied against the association for poor maintenance or lack of safety measures which led to accidents. The legal costs and the penalty, if any, incurred surrounding such events can create a major dent in the corpus funds of the community. It is hence, advisable that the association takes adequate precautions against such scenarios.
Summary Table: Association Insurance vs. Individual Homeowner Responsibility
| Feature | Association Responsibility (AOA/RWA) | Individual Homeowner Responsibility |
| Physical Structure | Common areas: Clubhouses, halls, parking, and gym. | Private interior space and the home’s “shell.” |
| Shared Assets | Lifts, generators, water pumps, and transformers. | Personal furniture, appliances, and electronics. |
| Personnel | Security, housekeeping, gardeners, and plumbers. | Private domestic help or personal drivers. |
| Liability | Accidents in pools, parks, or common walkways. | Incidents occurring strictly inside the private flat. |
| Safety Systems | External fire hydrants and community fire alarms. | Internal sprinklers and smoke detectors. |
| Vehicles | Maintenance of the parking structure/slots. | The actual car or bike parked in the slot. |
In a nutshell:
Being a part of the association is voluntary. It comes with a load of responsibilities. However, it is equally gratifying when you acknowledge the contributions. As a resident, you need to evaluate how the association has handled risks in the past and what arrangements they have made to tackle unforeseen events. As a member, you must assess and hedge all types of risks. You should always avail of insurance after thorough research and comparison of available products. SecureNow offers a comprehensive comparison across all plans available and simplifies the process of signing up for insurance.
Frequently Asked Questions (FAQs)
1. Does the society’s insurance cover a fire that starts inside my kitchen?
A) Typically, no. The association’s policy covers common areas and the building’s exterior structure. Damage to your personal belongings, furniture, and internal fittings must be covered under your own individual “Home Contents” insurance policy.
2. If the lift breaks down due to a power surge, who pays for the repairs?
A) If the association has Property Insurance for Common Assets with a machinery breakdown rider, the insurer will cover the repair or replacement costs. Without insurance, these expenses are usually drawn from the society’s maintenance corpus or collected as an emergency levy from all residents.
3. What is “Public Liability Insurance” for an apartment complex?
A) This covers the association if a visitor or a resident is injured in a common area (e.g., a slip near the swimming pool or an injury in the gym) and sues the association for negligence. It covers the legal defense costs and any compensation awarded.
4. We hire security guards through an agency; do we need to provide them with health insurance?
A) If the staff is employed by a third-party agency, that agency is legally responsible for their insurance. However, for staff employed directly by the association, it is the association’s responsibility to provide health and accidental death benefits.
5. Are natural disasters like floods covered for the clubhouse and community hall?
A) Yes, provided the association has opted for a comprehensive Immovable Property Insurance policy that includes “STFI” (Storm, Tempest, Flood, and Inundation) and fire cover for common buildings.
About The Author
Shivani
MBA Insurance and Risk
She has a passion for property insurance and a wealth of experience in the field, Shivani has been a valuable contributor to SecureNow for the past six years. As a seasoned writer, they specialize in crafting insightful articles and engaging blogs that educate and inform readers about the intricacies of property insurance. She brings a unique blend of expertise and practical knowledge to their writing, drawing from her extensive background in the insurance industry. Having worked in various capacities within the sector, she deeply understands the challenges and opportunities facing property owners and insurers alike.
