Do you have enough condo insurance in the case of loss or damage? Would you be covered financially if something happened to your home or the complex? In this article, we’ll go through what condo insurance looks like and if you have enough, so you can ensure you’re fully protected—no matter what comes your way.
What is condo insurance?
Condo insurance, also called HO6 insurance, is similar to homeowners insurance but for your condo. It helps cover property damage of your condo and liability related to its residents.
Your condo insurance has three main parts: dwelling (structure), personal property, and liability. You may also want to consider loss assessment coverage, which is specific to condo owners. We’ll go through each of these in depth below.
Note: You also want to be aware of loss of use coverage. Learn more about loss of use here.
What is my HOA policy?
The main difference between condo insurance and homeowners insurance is that your condo is partially covered by your homeowners’ association (HOA). Your condo association will have a master policy that covers certain incidents related to communal parts of your condo unit.
Your condo association policy will usually cover the exterior of your condo and any common areas. There are different types of policies, so you’ll want to be aware which your condo association has:
- Bare walls or wall studs in: This is most common, and the master policy only covers the bare structure. This does not cover anything that’s inside your unit, including any structural aspects, bathroom and kitchen fixtures, countertops, or personal property.
- All-in or all-inclusive: The homeowners’ association protects all exterior surfaces as well as interior ones, including fixtures, structures, installations, and additions. In this case, you are only responsible you’re your personal contents and liability coverage.
- Special entity: This covers the condo’s exterior and interior structures in their original form. It doesn’t cover any structural improvements or additions, and it doesn’t cover personal property.
Your HOA policy may not even cover all of the damages outside your unit. For example, the master policy may not include flood insurance. That means if the condo complex is hit with a devastating flood, it would be the responsibility of all the condo owners to split the cost of rebuilding. This is where loss assessment coverage comes in, which we’ll discuss below.
You want to know your condo HOA policy before you shop for your own condo insurance. This ensures you don’t end up with any gaps in coverage that can cost you financially down the road. Condo master policies aren’t always easy to read, so you can ask your InsuraMatch agent to review it with you by giving us a call at (844) 522-0543.
How much you need: enough to cover the fixtures and interior structure
Dwelling or structure insurance can help cover the structural aspects of your condo. This can include interior walls, floors, ceilings, cabinets, carpets, light fixtures, bathroom and kitchen fixtures, and countertops.
Dwelling insurance only covers in the case of certain covered perils. Be sure you get a list of covered perils from your insurance agent. Common covered perils are:
- Storms and weather
- Smoke damage
- Frozen/broken pipes
If your condo’s master policy is all-inclusive, you may not need your own dwelling insurance. Talk to your insurance agent to see what your HOA policy will and won’t cover with your interior structure.
So how much dwelling coverage do you need? Often, mortgage lenders have specific requirements for dwelling coverage, so you can go based on their requirements. If the lender doesn’t have a requirement, we recommend getting a valuation from your insurance agent or a property expert. Consider how much it would cost to replace or rebuild your home. In the case of a total loss, you want your dwelling insurance to be able to restore your condo unit as it currently is.
How much you need: enough to replace all the items in your home
Contents coverage, also called personal property, helps cover everything you own. If you took your home and shook it upside down, it’s all the “stuff” that would fall out. This can include furniture, clothing, appliances, electronics, jewelry (up to certain limits), artwork (up to certain limits), and other belongings.
Note that some valuables, like fine jewelry, fine art, and certain electronics are not covered or only partially covered under your condo contents coverage. You may need to purchase a floater for additional coverage on these items.
When looking at contents coverage, you’ll need to compare actual cash value versus replacement cost. Actual cash value means you are paid out the amount that the item is worth at the time of loss, including depreciation. A lot of condo owners choose actual cash value because it’s cheaper, but you end up getting paid out a lot less in the case of a claim. Replacement value costs more in your premium, but it ensures you could replace that item new today if you needed to.
For example, your TV cost $1,000 two years ago. Today, with depreciation, your TV is worth $500. Actual cash value would pay you the $500 it’s worth today in the event of a covered loss, but replacement cost would give you the $1,000 to buy a comparable TV.
How much personal property coverage do you need? You want enough to cover all the items you own. You should do a home inventory to come up with the exact number. If you need a general estimate for your contents, a lot of experts will assume $40,000 in personal property for the first 1,000 square feet and then add $5,000 for each additional 500 square feet. However, this is a rough estimate and doesn’t ensure all of your items, especially your valuables, are fully covered. We still recommend doing a thorough inventory to get the correct number for your contents’ value, and always update your coverage whenever you add more belongings to your home.
How much you need: enough to cover your assets
Condo insurance doesn’t just help protect the physical structure and belongings. Your condo insurance also has a liability portion, which can help protect you if someone is injured while in your condo. If someone gets hurt on your property, liability can help for their medical payments (and other related costs). This liability coverage can also cover some incidents off-property, like dog bites, slander, or other financial responsibilities where you are found at-fault.
Liability lawsuits can be financially enormous, sometimes even hundreds of thousands of dollars. If you don’t have enough liability insurance, the remainder of the cost for the legal fees and lawsuit settlement would fall on your shoulders. That also means your money and assets could be on the line.
That’s why every insurer will recommend you get enough liability insurance to cover all of your assets. This ensures that if you are found responsible for someone’s damages or injuries, they can’t come after your home or belongings. Your insurance has you covered.
Liability insurance is the least expensive part of your condo insurance, so you don’t want to skimp here. If your condo insurance liability doesn’t cover all of your assets, consider getting an umbrella policy for additional liability protection.
Loss assessment coverage
Loss assessment coverage steps in for any incidents that occur outside of your front door but aren’t fully covered by your condo’s master policy. You and the other condo owners collectively own the common areas, so you may be financially responsible if:
- The claims against the master policy exceed the policy limits
- You are required to contribute part of the deductible
- There is a loss that isn’t covered by the HOA insurance policy
For example, someone slips and falls at the community pool. The condo HOA policy will pay their medical payments and any legal fees up to the limits of the master policy liability. But, if the injured person’s bills are higher than the HOA’s insurance limits, the condo owners would likely have to foot the rest of the bill.
Damages to common areas or the outside of the building may also fall to condo owners if the cost to rebuild exceeds the master policy limits or if it is caused from an uncovered peril (like if the master policy doesn’t include flood insurance).
Some HOA plans also have special deductibles for certain hazards, like flood or hurricane. This means that each condo owner has to pay a certain deductible in order for their insurance company to pay out the remainder.
Loss assessment coverage can help pay for any of these incidents where you would be responsible for the condo complex’s damages or liability. Work with your insurance agent to ensure your HO6 policy and your condo’s master policy are working in tandem, so you’re fully covered.
Do you have enough condo insurance?
Your condo insurance is there to protect your home, family, belongings, and assets. You need just the right amount of coverage to replace all of your structures, fixtures, and contents in the case of a total loss. You also want to ensure you’re fully protected in cases of liability and other non-covered perils, like flood.
You also have to balance the coverage you need with your allotted monthly budget and risk tolerance. Also, make sure you’re aware of your condo insurance exclusions so you can adjust your plans or find a different policy accordingly.
Not sure how much condo coverage is right for you or what you need? No worries. That’s what we’re here for.
Compare condo insurance quotes with one of our expert insurance advisors at (844) 522-0543
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