 Think Tech Hawaii, civil engagement lives here. Welcome to Condo Insider. You know, I've said before about 38% of our population lives in an association, whether it be a homeowner, condominium, co-op, plan unit development. And this show is, its purpose is to try to educate board members and owners on what it's like to be in an association, what the challenges are, what the important issues are, because owners have responsibilities in addition to the board through your governing documents. And as you know, in the last couple of months, we've had quite a number of perils that have affected associations. We had a major fire, we've had lava, we've had flooding. All of these things are major problems for associations and major costs, but homeowners are not left unscathed as they have responsibilities. So I thought we'd have a little review today and invited a really good friend of mine, Sherylen Tanaka. Welcome. Thank you. She's vice president of Atlas Insurance. To specifically talk about insurance that homeowners and tenants should have, and maybe if we have time, we'll talk a little bit about some of the challenges the industry faces today. But welcome to the show, Sherylen. Nice to see you. Thank you. I know I saw you at the CAI Legislative Action Seminar. Yes, and you did wonderful. Oh, I wish I owe you. I know. Did you think the seminar was worthwhile? I did, I did. We had a seminar talking about all the new legislation this year and all the exciting new challenges we have because of that. But you're in the insurance business. Tell us a little bit about yourself. Well, I've been in the industry now for 15 years. I came out of straight out of college from UH. Very thankful, the best industry to me, in my opinion. I'm very thankful every day for being in insurance because everybody needs it. And I get to educate everyone every day about why they should have insurance and the coverage and the limits that they should have. And you work for Atlas Insurance. Did you always work for Atlas? Have you started or? No, I've been with Atlas now for 10 years. Prior to Atlas, I worked at GEICO Insurance, the GECO. So I did auto insurance and homeowners, personal lines policies there. And then I came over to Atlas Insurance. And tell us about the big companies, small companies, do they do a lot of insurance? Yes, so Atlas is the largest insurance agency in Hawaii. And we do everything pretty much. We have a large personal lines group that helps owners, individual unit owners, homeowners, personal auto, umbrella. Basically, if you own it personally, they can help you. We also have a large AOAO unit that ensures a lot of condominiums, master associations, homeowner associations, sub associations. And then we also have employee benefits. We have construction, surety. We have a large risk consulting group that also helps us. And we also have in-house claims consultants that really helps us advocate for our clients. Because we work very hard to partner with our clients to help them. But how many employees does Atlas have? We have 106 employees. Now we have two offices on Oahu, one on Maui, one in Kona, one in Hilo. And we have one person on Kauai. Wow, a big company. I don't want to spend a lot of time on association shares. I want to talk about the homeowners who sometimes are left holding a bag because they haven't thought this through in my opinion. But just briefly, have you generally the types of policies and association must have pursuant to the law? So according to the 514B, the policies that they would need are the property policies. Ordinance and law is also a requirement under the 514B. A lot of times what would be helpful for the boards is if they read their bylaws, their declarations, it will tell sometimes what types of policies that that board should be purchasing such as flood. If the properties in a flood zone flood would be a requirement set by the declaration. Also general liability would be a requirement by 514B. There should be directors and officers policy that covers the board. This would be previous current board and volunteers. Also they should be purchasing. If they have employees that they manage, they should purchase workers comp policy. That's a requirement by the state. Also if there's autos, they should be purchasing a commercial auto policy. They should also look at hired and non-owned auto if a board member or a resident manager or a building manager is doing business on behalf of the association. There should be coverage for that. So those are typical policies. And I think also because there's a lot of policies, but there's also the fidelity bond or crime policy which protects for the association against employee theft. Correct, yes. From your experience because I know that boards every year they renew the policies, they pay the payment. Do you think they spend enough time talking to their agent about what the coverages are or not and are they really covered for the right amount? Are they just looking for cheap? A lot of times it's looking for the cheap because as a board, you know I'm sure that they're looking at the bottom dollar. They're looking at the bottom line making sure they're doing their duty to save the association as much money as possible. Sometimes looking at all the coverage is what is needed by the association to do their fiduciary responsibility. They should be looking at the coverage making sure the policies that they currently have are the correct policies. If they had the same type of policy for years and years and years, they may have outgrown the policy since they originally purchased it maybe 10, 15, 20 years ago and that should be a discussion that you know as a board they should have and also with their insurance agent. You know work with the insurance agent because all the agent wants to do is help the board make the best decision that they can for the association. Well the one term I know you're familiar with is called co-insurance where they don't insure the property for the right value. Correct. And that's a problem. That is a problem. If you can explain to our listening audience why that's a problem, what co-insurance is and and why it's a problem and why boards should look at their insured values. Sure. So actually under the 514B it is a requirement to insure your building for the full replacement value. So that would be the full replacement value to rebuild it brand new at today's construction prices. And so what happens is if those values have not been looked at in years if there could be an under insurance problem. And so the co-insurance says you need to insure it at a certain amount. So let's say it's supposed to be insured at a million dollars but you choose to insure it at 500,000. There's a co-insurance penalty that says that states if you insure it less than 90% of the total value you're going to result in a penalty. And so what happens is at the time of the loss is when you find out if you're insured at the right value or not. And so if you insured it let's say for 50% of the value probably they're going to pay only 50% of the claim because you didn't insure it for the right amount of money which is fair because insurance companies are taking the risk. And so you shouldn't be able to take advantage of them by insuring for a low value and expecting to be paid at a high value for a better word. Right, right, exactly. But you know we saw a lot of publicity in the paper after the recent fire in one of our high rises about people and insurance and the problems they face. So should an owner have his own insurance policy and what kind of policy is it? So an owner should purchase their own individual policy and it's called an H06 policy. Typically most owners have an H06 policy and what this covers is the interior of the unit because the master policy is going to cover the structure but the interior of the unit is owned by a unit owner. And there could be renovations, changes, improvements that have been made because the master policy is only going to cover what was originally as built, originally conveyed at the time of construction. If this new unit owner that comes in is now the fourth, fifth or sixth owner there could have been a lot of changes that have been made to the unit and that's what the unit owner needs to ensure is for those upgrades, those renovations that were done. If the original conveyance was a carpet on the floor and now when you go in there's hardwood floors the master association policy is only going to cover for a cost of the carpet. Brand new carpet but a carpet and what the H06 policy does is it looks at the value of the carpet, looks at the value of the hardwood floors and it'll give you that extra amount so that you can get those hardwood floors again. I assume it covers their personal contests like their TV and their furniture and their personal belongings although jewelry might be a special limit and a special endorsement for the policy. Well even the things we saw off on this fire were number one people were saying well I can't live here anymore I want to go rent someplace else is that covered under the H06? If they're so under the H06 policy there is a coverage called coverage D loss of use and what that gives you is coverage to live somewhere else if your home is deemed unlivable due to a covered loss so a covered loss would be something like a fire and that would pay for a rental to live elsewhere at another hotel or if you needed to you know rent an apartment. Some policies have a time frame so some policies say it'll pay whatever the amount is up to 12 months other policies have a dollar limit and so some of those policies could have been only 12,000 you know 20,000 so once that is depleted there's no longer any more coverage because you've maxed it out. That's something they can say I want to buy more coverage for loss of use? Some policies you can purchase more some policies it's you there's you cannot but that's something that you know the agent can help be insured with if that's something that's very important to them which it should be because you just never know what can happen and you want to make sure that you as a as a prudent owner knows everything about your policy so at the time of the loss you know what to expect you don't want to have surprises at the time of loss. Well I know from the one fire we had there were an awful lot of people who had loss of use but it was very minimal amounts of money that would maybe cover them for two or three months but really on a major fire or major peril you might be out of your home for a year or more. Yes which is something that you know a lot of people when you're purchasing the policy you're not thinking of the worst you're not thinking of the unexpected you're thinking of okay just get me the appropriate coverage at the best price I don't want anything more because I cannot foresee you know something like a huge fire. One more question before break so that's for an owner argument how about a person who rents their space out let's say a long term rental can they get loss of income? Yes they can it is a special what we call an endorsement or addition on the policy they can purchase that an additional cost it is available just talk to the agent and they'll help them. But again it's going to be if if they only bought if they're renting it out for a thousand a month they only bought a thousand dollars of the coverage yes they're covered for one month it's not a bottomless pit right it's a certain dollar limit yes then setting the limit is identifying how much risks they're going to have. Yeah so one of the questions that we do ask is how much are you renting out this unit per month and typically what we'll do is in the past you know this Marco Polo fire has pretty much been unprecedented is we'll times that amount by 12 because typically you know if a fire did happen not as big as Marco Polo that's how long we would estimate that someone would be out of their home for. So if you estimated 2,000 a month for 12 months you bought 24,000 a coverage correct once that's used up you're on your own. Yes. You have to think about it really carefully. Yes you do. Okay we're going to take a short break but I have a lot more questions for you you're going to get an A plus you're passing a grade you know all the answers so we'll be right back after this break. Hey that's you I want to know will you watch my show I hope you do it's on Tuesdays at one o'clock and it's out of the comfort zone and I'll be your host R. E. Kelly. See you there. I'm getting older do I need to worry about falling? Yes you do. Each year one in four people 65 and older will experience a fall and many will be serious. The majority of falls happen at home so remove things that could make you trip and install handrails to keep you steady. To learn more about the steps you can take to help prevent a fall please talk to your doctor. You can also visit AARPfoundation.org or MedicareMadeClear.com slash falls. This message was brought to you by UnitedHealthcare and AARP foundation. This commercial was telltelling I'm over 65 that means I have a one in four chance of falling and so and I hope I don't do it today anyway. Me too. But anyway we were talking about the loss of rental income and long-term rental well how about vacation rentals you know I happen to own a vacation rental and I income varies does an HO6 cover vacation rental loss of income? Some HO6 is so make sure I hope that you have a great agent that knows about the vacation rentals make sure that the insurance carrier knows that it is a vacation rental but as far as the loss of income and you get the appropriate HO6 policy there would be coverage for the what we call the fair rental value and and there's coverage for that. And the reason I brought that up was after the fire I decided to take a careful look at my policies only to learn that I was underinsured for everything because I was just looking for the I'm not sure whether the agents give you the the base quote and then you have to ask them or what but my policies and I have two vacation rentals did not cover vacation rental loss of income it did cover long-term loss of rental so I had to go through the effort of rechanging my policies to make sure I was protected because what we think we're covered for that was evident Marco Polo Farm people thought they had all these coverages and insurance and and they really didn't it's important probably to review your policy and what your life's all about make sure you've insured for the for the real risk with respect to that it is so see you have the HO6 policy a common thing that's happened and I'm going to say in the last 10 years might be longer or shorter is that 514b allows the condo association to be able to assess you for the deductible it may be assessed you because your unit caused the problem maybe three or four units are involved in this they just decided to see the assess it to the three or four units that they were the benefit of the policy and these deductibles have risen to five ten twenty thousand dollars because it's cheaper to insure for the association and pass that responsibility on to the homeowner through the HO6 than to buy it to herself correct so what's your take on a deductible issue is that a separate endorsement you have to tell is it automatic or so the HO6 policy there there is coverage for a deductible however the unit owner needs to have a conversation with the insurance agent and one of the things that you know they should do and the insurance agent should do and what they should do together is figure out what the AOAO deductible is and stay on top of that deductible each year when the policy renews the master policy renews so each year I live in an association I get a copy of my insurance summary each year and I take a look at what the AOAO deductible is and if I see that it's changed and the associations also will send a letter to each unit owner if the deductible has changed to make them aware so that way they can have a conversation with their insurance agent now different policies handle the assessment or the deductible differently it also could depend on the type of loss that occurred is how the deductible would be handled some insurance companies will cover the AOAO deductible under a coverage called loss assessment there are some companies that may cover it under the coverage aid dwelling limit and there's other companies that could cover the deductible under the personal liability limit so there's so many variances between insurance companies and between policies that is just so important for the consumer the unit owner to have a conversation with their agent let their agent guide them and and determining the best way to cover themselves let's just assume you had a hurricane and the association because they have their coverage but because of various reasons they need extra money to repair the unit so to repair the project and so they want to assess everybody $20,000 just for other items in the common areas because the costs are higher they want to take an opportunity to fix something else whatever it may be does the loss assessment cover that as a potential assessment by the owners not just with the deductible but on some other matter no so the true definition of a loss assessment is a one-time assessment fee and that that pays if every single unit owner is assessed that fee due to a covered loss so improvements would not be a covered loss under the insurance policy in the past before the 514B and before the AOA deductible came into play what the loss assessment paid for would have been for example if there was a pool accident maybe someone drowned in the pool and the family sued the association and that type of situation is where the AOA could assess each unit owner a one-time assessment fee to pay for that that's truly what that loss assessment coverage was for in the past today has changed and it has evolved a lot because of the 514B and the insurance carriers had to you know help the consumer in covering the AOA deductible that's why there's so many variances on how they cover it one size does not fit all yes yes one size does not fit all we just have a brief story about first I had to talk to last week they had a claim and they wanted to come in from Florida and supervise the claim of their condominium had to fire so they submitted to the association the cost of their airfare the cost for their hotel the cost of their meals for them to come here to assist in the administration of the claim saying submit it to the association's insurance oh is that covered no that wouldn't be something that's covered and also the AOA policy the purpose of that policy is not to pay for you as an individual unit owner to live somewhere else that's why you would have an HO6 policy however the HO6 policy would also not pay for the airfare or you know for something like that the HO6 policy because I'm assuming they rent out this unit the HO6 policy is really going to pay for the loss of income that they're losing because they're not able to rent it out if that was their primary location and that's where they live then the HO6 policy will pay for them to stay at a hotel room but because it wasn't their primary location really the purpose of the policy is to pay for the loss of income in this case it was a second home okay but they didn't live there either yes and they wanted to come and personally be engaged which is they're welcome to come yeah I just don't think the insurance company is going to pay for it no not for their airfare no to come but they should you know that's that's a situation they should have with their individual you know homeowner policy carrier and the agent you know help let the agent help them and figure out a way because you just if you have an advocate on your side that's the best thing you can ask for well in our well-known fire we're down to a couple minutes left so we'll try to do this and give them enough information the our listeners and what's going on well how about the tennis they don't have insurance how do they do what kind of policy do they get so a tenant should get a what we call an HO4 and this is known as a tenant policy and the tenant policy covers their personal belongings that's primarily what a tenant would purchase his policy for the policy would also cover though their loss of use and so if that tenant could not live in the home because of a covered loss like a fire that policy that tenant policy will pay for them to live in a hotel room or if they have to move out permanently or you know for a longer period of time that's what the the policy will cover is for that for their added expense now to live somewhere else so to be clear if i'm hearing you correctly the owner's HO6 policy is not going to pay for the loss of use of the tenant the tenant needs to buy their own HO4 policy correct yes yes the HO6 policy is for the owner not for a tenant it cannot transfer you cannot give it to them you can't the HO6 is for the owner the tenant has their responsibility to purchase their own policy assuming averages real quick wild guess what's the average HO4 policy cost for a tenant oh $200 a year if that and how about an HO6 policy for an owner HO6 policy would probably be about $300 a year it's interesting because i had to redo all my insurance because i have long-term rentals all the rest of it it worked out to about 350 per property for me to ensure it to the limits i need to cover the lost income to cover the assessment to cover everything where before i was paying like 250 it didn't increase the premiums on an annual basis by more than about a hundred dollars a year to get the right coverage and i guess landlords should be telling their tenants are requiring the lease yeah that they have an HO4 policy to protect themselves correct because what i've learned that uh course i took talked about one is a problem 55 percent of us blame someone else yes 33 percent tonight is a problem and 12 percent take responsibility and i'm sure all those tenants are going to say to the owner of the association you have to pay yes and there's not going to be insurance coverage correct yes and and that's why they should purchase their own policy so we're done with our last minute so what's your final thoughts my final thought is to talk to your agent you know as a consumer insurance is not the easiest concept to understand and it's ever changing with all the laws that come into play with you know especially now bill 69 is happening there's things that are happening in the marketplace and needs as an owner change and so as an insurance agent we want to educate we want to help the consumer make the best decision for them so that at the time of the loss they're not surprised you know it's it's unfortunate because when there is a huge loss that is a reminder for a lot of people to look at their own policies like you did you looked at your own insurance policies made sure so today you're better aware of what coverage you have so if something did happen nothing's going to happen but if something did you know what to expect well as an industry better and I should have known better but I didn't I think that's a message to everybody out there that you need to take a look at your personal insurance policies for your home as well as any investment property you have and make sure you've looked at all the little parts of what you're buying and not buying because you may not be covered adequately for some of your insurance I'm sure anybody watching this show besides talking to their own agent they had questions they could call you as well I'm sure yes so I want to thank all of you for watching condo insider this week we hope you learned something about the owner's policy the tennis policy and the differences between what the co-association is going to cover and we hope you tune in next Thursday three o'clock for another edition of condo insider aloha