In the state of Florida, condominium law requires that all associations are required to have an insurance appraisal. An insurance appraisal is a document that estimates replacement costs for all buildings or structures in the association. This appraisal report will show the size of all buildings and improvements, talk about the construction of the buildings, and estimate the current cost to replace the buildings and improvements. The association submits this document to the insurance company to purchase insurance coverage for their community.

Specifically, the law in Florida Statues 718.111(11) (a) states “Adequate property insurance, regardless of any requirement in the declaration of condominium for coverage by the association for full insurable value, replacement cost, or similar coverage, must be based on the replacement cost of the property to be insured as determined by an independent insurance appraisal or update of a prior appraisal. The replacement cost must be determined at least once every 36 months.”

The purpose of an insurance appraisal is for an association to know how much coverage to buy. Without an appraisal, an association would have to make this determination based on the insurance company’s recommendation or estimate. Before there was a law mandating an independent appraisal, many associations were over-insured. An accurate insurance appraisal can be a very valuable tool for the association to make sure that they have obtained the proper amount of coverage.

There are two types of insurance appraisals. The most common one is an appraisal to obtain hazard insurance. This coverage includes damages caused by hurricanes, tornadoes, fires, smoke, and vandalism. Hazard insurance appraisals develop the replacement cost new of the improvements for the property and then subtract out the building components that are not covered by the policy. The association’s hazard insurance covers the structural components of the building and a few other items including plumbing, electrical, and HVAC rough-ins, sheet rock, interior doors and baseboards. However, it is the responsibility of the unit owner to purchase an individual policy (called an H06) to cover the interior of their unit for items such as finished carpentry, cabinets and countertops, plumbing trim, electrical trim, ceiling fans, interior paint, flooring, bath tile and tubs, and built-in appliances.
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