If you own a condo, just like a single family home, you need insurance. It’s not homeowners insurance, rather it’s condo insurance – sometimes referred to as an “HO6” policy. But what is condo insurance and what makes it different from homeowners?
Like your home insurance, condo insurance can cover liability claims, damages to your condo unit and your personal belongings. It will even offer coverage for lost use (temporary living expenses) if you’re forced to seek alternative housing due to a covered incident. However, unlike your homeowners policy, a condo policy won’t generally provide coverage for the common areas of the condominium community. The common areas are the responsibility of your condo owners association or HOA.
To better answer the question, “what is condo insurance?, let’s take a deeper look.
A a general rule, if you have a mortgage on your condominium, your bank will likely require you to purchase condo insurance. Moreover, some condo or homeowners associations require that owners carry certain coverages and/or limits. That being said, if you own the property free-and-clear, and there are no stipulations in your HOA agreement requiring coverage, then there are no state regulations compelling you to buy condo insurance. However, it is highly recommended—after all, your condo is still a valuable asset and the liability protection is always a good idea for a home owner.
In many ways, your condo policy will work like a homeowners policy. It will provide safeguards against losses to property and liability claims. The big difference will be in the common areas, or exterior structure (in most cases) where your condo association’s master policy provides coverage. Let’s review some of the common or standard condo insurance coverages:
|Dwelling||In the condo policy, this coverage pays to repair or replace property in your condo unit. This is sometimes called “walls-in” coverage and usually includes everything from the drywall in when there is a covered loss.|
|Personal property||The personal property coverage will pay to repair or replace your personal belongings. This is subject to the limits you select when buying the policy. If you personal belongings are valuable, then remember, it is never included under the HOA’s master insurance policy. Personal belongings are the things not attached to your unit, like your furniture, clothing, audio and video equipment.|
|Liability||This coverage is to protect you in the event of a lawsuit. For example, if a guest slips-and-falls in your home you could be legally responsible for their injuries, personal liability provides coverage up to the limits of your condo policy. Liability coverage can also provide coverage for property damage to others if it’s caused by your negligence and considered a covered loss.|
|Loss of use||If you are forced to secure alternate housing during the repairs of a covered loss, then loss of use coverage pays for additional living expenses. Typically, this coverage is provided above what you would normally spend, and can including meals and housing or hotel costs, up to your policy’s limits.|
|Loss assessment||Loss assessment is an important coverage for the condo owner. For example, if there’s an accident in a common area of your condominium community, like the pools, stairwells, or clubhouses, you could be assessed to help replace or repair the damage. Under normal circumstances the HOA’s master policy provides coverage for the repairs. However, if the amount of damage exceeds the master policy’s limits, the condo owners may be assessed equally to help pay the difference. Loss assessment helps pay for these assessments. Note, the typical condo policy only provides between $1,000 to $5,000 for loss assessment coverage, but you can buy more coverage for by endorsement.|
A condo insurance policy segments the types of losses that are covered by what are know as perils. These are events that can cause damage to your condo unit or personal property. Policies have different way of defining what perils are covered, so you should ask you insurance agent before you buy and HO6 policy. If you’re interested, below are a few examples of perils that are typically covered under a home or condo insurance policy:
Learn more about perils.
Your condo insurance policy is not for all the damage that can happen to your home. There are things that will not be covered. In fact, our HO6 insurance policy will have a list of coverage exclusions. Below are some of the most common examples of what’s not covered:
Additionally, your condo insurance will not provide coverage for damage to shared or common areas of your condo community. It will not provide coverage for any property your condo association or HOA owns. The common areas and shared facilities are normally covered by the condo association’s master policy. This typically incudes the exterior walls of your unit, the stairs, stairwells and hallways too.
A community’s homeowners association (HOA) is responsible for buying and maintaining a master community insurance policy. These policies are designed specifically for HOAs, and provide coverage for the common areas of the community development – as well as other specific coverages. In fact, the premium for this policy is likely accounted for in your monthly HOA dues.
The coverage options and limits, as well as any exclusions contained in the HOA master insurance policy will vary based the coverage purchased, limits selected and insurance carrier. If you are concerned about what is covered, you should contact your condo association as they can clarify what is covered by the master policy, and assist you in determining what you will need in your condo insurance policy.
Your condo association will have a few options when purchasing an HOA master policy. Because these difference can impact the type of coverage you may need, below are the three types of master insurance policies for condo communities:
This is sometimes referred to as an “all inclusive” policy. It is the most comprehensive and least common of the three coverages types for HOAs. This type of policy insures all property in your development, as well as fixtures in your unit. If you HOA has an “all-in” HOA policy, your condo policy can be for your liability and personal belongings.
This is the more common form of HOA coverage. Bare walls policies will covers shared or common areas, property owned by the condo/homeowners association, but does not extend to individually owned unit interior walls and fixtures.
If you HOA has this type of master policy, it will insures common areas and association-owned property but, unlike bare walls coverage, it also offers coverage for fixtures in your unit if it was installed during the original construction.
If your association has an “all in” master policy, it will cover more than the bare structure of your condo. However, there still some important, basic differences between an association master policy an HO6 insurance policy:
Outdoor spaces: Parking lots, garages, and sidewalks.
Recreational areas: Tennis courts, golf courses, swimming pools, party centers, and meeting rooms
Common spaces: Hallways, staircases, and elevators
Individual unit areas: Parking lots, garages, and sidewalks.
Personal belongings: Furnishings, clothes, kitchenware, and electronics
Valuables: Jewelry, art, silverware, and other valuables that you may need scheduled.
Before you buy a condo insurance policy, make sure you understand what is covered by your condo association’s master policy. Your coverage selections and limits will vary depending on what is covered by the association’s master policy. Additionally, if you have to purchase coverage for the interior of the condo, do a good job of assessing the value of your flooring, cabinets and upgrades, the replacement cost estimators for condo policies aren’t as accurate as with the home insurance policy.
|Coverage type||Coverage limit|
|Dwelling||This is an important coverage to know what you master HOA policy covers. For example, if your association’s policy is “all in” coverage, you may not need as much or any dwelling coverage. Alternatively, if your master policy is “bare walls” coverage,” you’ll need dwelling coverage your interior fixtures and upgrades.|
|Personal property||Creating a home inventory is an ideal way to figure out the right limit for your personal property coverage. For example, if your belongings total $75,000, you need at least that much in coverage. Keep in mind, limits and options will vary by insurer.|
Most condo policies will offer a minimum of $100,000 in liability limit, and a maximum of $500,000. If you need more than $500,000 in liability coverage, consider purchasing umbrella insurance. Before you select your limit, assess you assets and chose the limit that best protects your interests.
|Loss of use||Some insurance carriers offer loss of use coverage as a percent of your combined dwelling and personal property coverage. A common amount is 20%. If you select a small limit for property and dwelling, then you’ll have small limit for loss of use. Some carriers will offer loss of use for a set number of months at “actual loss sustained.” This is better for condo owners when available.|
Similar to your homeowners policy, there are many factors that affect your premium. Some of the items include location, claims history, fire safeguards, credit score (in some states), coverage choices, deductibles, and the condition of your unit. Learn more about factors impacting your price for home insurance.
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