Condo Insurance You Need That Your Condo Association Doesn’t Cover
Buying a condominium can include a fair amount of shared space, including lawns, recreational facilities and common walls. Due the shared nature of (some) of your living space, you also get to share in some insurance coverage with your condo association. Because of this, it can be confusing knowing what coverage you’ll need for your condo unit that doesn’t overlap with your condo association’s insurance policy. In this article, we’ll take a look at the condo insurance you need that your condo association doesn’t cover.
Condo association insurance usually covers building exteriors and common areas through a Home Owner Association, or HOA, policy. It probably won’t cover what’s inside your unit, and it may not cover everything outside of your unit.
Condo insurance differs from regular homeowners insurance. Also called HO-6 insurance, condo insurance covers the interior of the unit and personal property inside. It’s also known as “studs in” or “walls in” condo insurance coverage.
Understanding Your Condo Insurance vs. Your Condo Association Insurance
There are 3 types of condo association master policies
Before choosing a condo insurance policy for your home, you’ll want to understand what your association’s master policy covers, so you don’t purchase unnecessary additional coverage. The condo association documents should describe what it covers and help you determine what type of coverage you need.
These are the three common types of master policies that a condo association may choose from, going from the most to least protection for the unit owners:
All in and all-inclusive condo insurance
All in or all-inclusive coverage helps cover all individual units’ exterior and interior surfaces, including fixtures, installations and additions. The individual owner is responsible for personal property.
Special entity condo insurance
Special entity covers almost all of the condo structure, including fixtures in units. It doesn’t include structural improvements or unit additions. The unit owner must have personal property coverage.
Bare walls in condo coverage
Bare walls in or studs in coverage tells you that you must insure your condo’s interior contents. This includes fixtures and countertops and your personal property.
What HO-6 condo insurance covers
As a condo unit owner, you’ll need to get your own HO-6 insurance policy. It will cover damage inside the unit including floors and ceilings, personal property and liability claims. Examples include a break-in, water damage to your kitchen walls, or someone slipping on your wet bathroom floor.
Here are losses that a typical condo insurance will help cover:
• Smoke damage
• Frozen pipes
Most condo insurance policies have exclusions, oftentimes including flood and earthquake damage. Separate policies will be needed for those hazards. You’ll want to review your policy’s exclusions carefully with your insurance agent and determine if you need any additional coverage for additional risks.
Your condo insurance should also include liability insurance in case someone is injured in your unit. You should have high enough liability limits to cover your assets. Policies range from $100,000 to $500,000, though an umbrella policy can be purchased for additional coverage if you have more assets.
An your condo insurance policy will also help cover the belongings that you keep inside your condo, along with any fixtures or improvements you make to your unit.
A key thing to remember when valuing your possessions is to consider the replacement cost in today’s dollars for new items, not what they originally cost — and definitely not the depreciated value, also called actual cash value.
Some homeowner’s insurance policies only reimburse for actual cash value of belongings instead of the replacement costs. Actual cash value coverage is cheaper but it doesn’t cover depreciation of your items.
Another type of insurance to consider buying as a condo owner is loss-assessment coverage. This covers insurance expenses not covered by the condo association, or in excess of the group coverage.
Condo residents collectively own the common areas of a condo project, and pay for damage to them through the master policy. Loss assessment coverage could provide coverage for injuries from a pool slide that’s excluded from the HOA policy, for example.
The condo association may have loss-assessment insurance, but it may not be enough to cover the pool slide accident. If not, individual condo owners can buy their own loss-assessment coverage.
This extra coverage can also be used for weather damage to the outside of a building, or other damages to common areas that aren’t covered by the HOA insurance policy.
Determining your costs
If the HOA policy is for “bare walls” or “wall studs in,” then you may need more HO-6 insurance than you would otherwise.
A rule of thumb for deciding how much coverage you’ll need to protect your belongings and the interior such as floors, walls, kitchen cabinets and fixtures is to assume $40,000 in personal property for the first 1,000 square feet of your condo. Add $5,000 for each additional 500 square feet. However, taking an inventory of your belongings is the surest way to know how much personal property you have and need to cover.
Liability insurance should cost around $20 a year for $300,000 in liability coverage.
An insurance agent can help you determine how much coverage you need, and can help decipher your condo association’s master policy to find out what is and what isn’t covered by the HOA.
One of our expert insurance advisors can help you determine what kind of condo insurance you need and compare quotes.
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