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Cooperative or "co-op" insurance is a type of property and casualty insurance for owners of co-op apartments or other cooperative organizations. These policies generally cover losses to the building or individual units.
This type of coverage includes burglary, fire damage, and liability for residential co-ops. The co-op building generally provides coverage for common areas such as the hallways, foyer, basement, roof, elevator, and common walkways. The co-op association's insurance policy generally protects the building but not the individual owners' apartments unless the damage to an apartment occurs as a result of something under the association's jurisdiction.
Purchasing cooperative insurance lets policyholders pool together with others who have similar risks to purchase more extensive coverage at a more affordable rate. If you have a mortgage on a co-op, your mortgage lender may require you to have insurance to protect their investment.
However, a co-op is a share of ownership that allows the buyer access to the unit, while a condominium is a piece of real property that you own. As a result, a co-op mortgage loan—also called a share loan—is different than a mortgage to buy a condo or home. The lender will require a lien on the access to the unit so they can transfer ownership if the borrower defaults on the share loan.
Trade unions often offer some form of co-op insurance because there may be certain risks that everyone in the union is exposed to. It makes economic sense to purchase coverage as a group.
The typical model is that everyone involved in the cooperative that pays for the insurance receives an ownership portion of the policy equal to the percentage they pay. Those who pay for 5% of the total policy would receive 5% ownership.
It's important to find out what the building association's insurance policy covers in the case of residential buildings. When you buy a co-op apartment—a housing unit in which you hold a share of the corporation that owns and manages the unit—the building will already have an insurance policy in place. The master policy protects itself and its shareholders from claims resulting from lead paint exposure, sewer backups, earthquake damage, and other events that can affect the entire structure.
However, an individual insurance policy might be needed for the shareholder's apartment and belongings that are not covered by the co-op association's master policy. There might be exceptions if damage is caused by an occurrence that does fall under the building's policy. These exceptions are usually related to the infrastructure, such as if a leaky radiator damages the floor within a unit or a dripping water pipe causes cracks in the ceiling. As a result, the building might shoulder the cost of these repairs.
Individual shareholders should buy their own policies to ensure coverage of their personal belongings and liability for injury or damage to others. This type of homeowners' insurance can confusingly also be referred to as co-op insurance.
Healthcare cooperatives have historically been suggested as an alternative to both publicly funded healthcare and single-payer healthcare in the United States. A healthcare co-op is a nonprofit organization where the people who own the company get their insurance from the company.
The Obama administration brought up cooperatives as a possible model for universal healthcare in the United States. These health insurance cooperatives would not have been run or owned by the government but instead, receive an initial government investment and then be operated as a nonprofit organization.
Health insurance co-ops continue to exist in some states across the U.S. The Affordable Care Act (ACA) of 2010 included provisions for cooperative health insurance programs called Consumer Oriented and Operated Plans (CO-OPs). At one time, 23 of these plans operated in various states as qualified nonprofit health insurance issuers. However, there are fewer than a handful of Obamacare co-ops still in existence.
Various factors might have contributed to the high rate of failure among these cooperatives. They were faced with a very competitive marketplace that already included many well-established and well-funded health insurance companies. Co-ops faced political pressure, a lack of management capacity, and fiscal constraints.
Cooperatives faced many barriers to entry, such as dealing with unfamiliar risk pools, lower payments than expected, higher or lower enrollment than expected, and the high cost of rendering administrative services. As a result, many co-ops lost money.
There were once numerous rural health cooperatives established by the Farm Security Administration (FSA). Most of these healthcare cooperatives closed or merged over the years because they lacked a sufficient economy of scale.
It would depend on the cause of the injury. The co-op association's insurance policy would most likely cover the claim if the accident resulted from a structural failure, such as a wall or ceiling caving in. Your co-op insurance would cover a claim if your personal negligence caused the accident and you carry a liability rider or a liability policy.
Cooperative insurance may also refer to health insurance. Rural health cooperatives established by the Farm Security Administration (FSA) offered comprehensive medical care to low-income farmers, sharecroppers, and migrant workers from 1935 through 1946. These cooperatives offered healthcare services to more than a million migrants and 650,000 farmers at their peak. The Affordable Care Act also includes provisions for co-op health insurance programs
You don't purchase your apartment when you buy a co-op as you would if you bought a condominium. You buy into the ownership of the entire building as a shareholder in a co-op, which is not considered real estate. However, a condominium is real property since you own the unit but have legal access to a jointly owned common area.
A co-op association's insurance policy typically only covers the building itself, not damages to individual apartments. An exception exists if the damages are brought about by an issue that the association is responsible for, such as maintaining safe roofing or walkways. However, co-op shareholders can buy cooperative policies to protect themselves, pooling with other owners to cut costs. Cooperative insurance can also refer to health insurance cooperative organizations.