What is Cooperative Insurance

Cooperative (or co-op) insurance is for owners of co-op apartments – or other cooperative organizations – and it covers losses to their units. For apartment co-ops, coverages includes burglary, fire damage and liability, among others. Generally, a co-op building provides coverage for common areas such as the hallways, basement, roof, elevator and common walkways. The co-op association's insurance policy protects the building, not the individual apartment owners' apartment, unless the damage occurs as a result of something under the association's jurisdiction.

BREAKING DOWN Cooperative Insurance

Purchasing cooperative insurance lets policyholders pool together with others who have similar risks to purchase more extensive coverage at a more affordable rate. For instance, in addition to apartment buildings, trade unions will often offer some form of co-op insurance, since there may be certain risks that everyone in the union is exposed to, and it makes economic sense to purchase coverage as a group. The typical model for a cooperative is everyone involved in the cooperative that pays for the insurance receives a portion of ownership of the policy that is proportional to how much they pay. So, those who pay for five percent of the total policy would receive five percent ownership.

Cooperative insurance covers claims that affect individual shareholders and the personal belongings inside their units. It is advisable to find out what the building association's insurance policy covers prior to signing up for a co-op insurance policy. When you buy a co-op apartment, (a housing unit of which you hold a share of the corporation that owns and manages the unit) the building will already have an insurance policy that protects itself and shareholders for claims resulting from lead paint exposure, sewer backups, earthquake damage and other events that might affect the entire building.

Cooperative Insurance and the American Healthcare Debate

In the debate over American healthcare reform, healthcare cooperatives were posited as an alternative to both publicly funded healthcare and single-payer healthcare. The Obama administration brought up cooperatives as a possible model for universal healthcare in the United States. As proposed, this future health insurance cooperative would not be run or owned by the government, but it would instead receive an initial government investment and then be operated as a non-profit organization.

There once were numerous rural health cooperatives established by the Farm Security Administration (FSA). Most of them closed or merged over the years because they lacked a sufficient economy of scale. Thus, co-operatives currently have so little market share that they are virtually "invisible."