What Is Condo Insurance?

What Is Condo Insurance?

Condo insurance is necessary regardless of whether it is your first home or a vacation home. Having condo insurance offers similar benefits to having homeowner’s insurance, including coverage for your home and personal possessions.

Unlike home insurance, a condo policy works in tandem with homeowners association coverage. If you are trying to buy a condo, your lender will likely require you to get insurance, and your homeowner’s association may also mandate this.

Learn how condo insurance works and determine how much coverage you need.

What Is Condo Insurance?

Condo insurance is a policy obtained by a condo owner to help cover the costs of property damage to the unit or personal belongings loss. Consider condo insurance to be similar to homeowner’s insurance.

In the insurance industry, condo insurance is known as an HO-6 policy. HOA insurance policies come in various forms, each offering different degrees of protection to unit owners.

Before choosing your coverage, make sure you know what is covered by your homeowner’s association (HOA) policy, commonly known as a Master Condo Policy. Your association’s insurance policy usually covers the communal areas of your building, but your unit’s interior and personal belongings may be exposed.

Why You Need Condo Insurance

Although your condominium association probably has its own insurance policy, condominium insurance is still beneficial. The association’s condominium building, common property, and liability insurance could all be covered by their insurance.

Unfortunately, there are several situations in which your insurance coverage will not protect you or your belongings, such as a break-in, water damage to your living room walls, or someone tripping on your wet kitchen floor and injuring themselves. That’s why you’ll need condo insurance tailored to condo and co-op owners.

Condo policies help safeguard your personal belongings and your unit’s interior.

Condo Insurance vs. Condo Association Insurance

Condominiums are covered by two types of property insurance policies: homeowners’ association policies and individual condo policies. A majority of HOA policies are purchased by the building managers using the fees collected by the association. In addition to common areas, elevators, exterior walls, and roofs, HOA policies also address the building structure.

HOA policies rarely cover individual condominium units, necessitating the purchase of condo insurance.

In most cases, HO-6 plans provide essential structural coverage. For example, your condo policy may only cover damage to your unit’s ceilings, floors, and walls. Liability and property coverage are also included in HO-6 insurance.

What Does Condo Insurance Cover?

Except in circumstances when your condo association’s master policy offers coverage, HO-6 insurance protects you against property losses and liability claims, just as homeowners insurance. The following are some of the most common condo insurance policies:

Coverage type Definition
Personal property You can use this to replace your possessions such as furniture, clothing, and gadgets if they are damaged by a covered risk like a falling tree.
Liability If you are legally liable for the damages or injuries of others, personal liability insurance protects you up to the limits of your HO6 policy.

Liability coverage can also cover medical expenses resulting from an accident in your condo unit.

Dwelling This safeguards the interior of your unit, including sheetrock and flooring, against harm.
Loss of use This coverage helps cover lodging and meals when you have to leave your condo because of a covered loss.

Loss of use coverage, if included in your policy, typically pays the difference between your expected expenses and relocation charges.

Loss assessment If an accident occurs in a common area of your unit, such as the pool or stairwells, this coverage might be helpful.

Loss assessment coverage is usually limited to $1,000 in condo policies, but you can easily extend the maximum with an optional endorsement.

Most conventional condo policies only pay actual cash value for personal property and restrict how much they will pay for specific goods. You may find that purchasing replacement cost coverage and supplementary coverage for your most valuable possessions can be beneficial if you have to file a claim.

What Does Condo Insurance Not Cover?

Your HO6 insurance policy will outline the coverage exclusions. Here are some common examples of what isn’t covered:

  • Earthquakes
  • Flooding
  • Damage from termites
  • Damage caused by wear and tear

In general, condo homeowners insurance does not cover damage to common areas of your complex or property owned by the condo association. The master policy of your condominium association safeguards all common spaces of your complex, from the stairwell to the party center.

What Does Condo Insurance Cost?

According to the National Association of Insurance Commissioners(NAIC), the average cost of condo insurance is $506 per year or $42 per month.

Several factors affect the price of condo insurance, including:

  • Detailed information about the construction age and type
  • Insurance types, and coverage amounts
  • Amount of the deductible
  • Location
  • Age of the policyholder
  • An overview of the policyholder’s credit history
  • Status of the policyholder’s marriage
  • Proximity to fire hydrants and fire stations

In fact, the cost of condo insurance varies by nearly $700 between the most and least expensive states.

Condo insurance is generally more expensive in regions prone to natural disasters since the potential of catastrophic property loss is higher.

Is Condo Insurance Required?

Condo insurance is required by most mortgage lenders, just like homeowners insurance, to safeguard their financial interests during the term of your loan.

Many HOAs require it even if you have paid off your mortgage or purchased the house outright.

Optional Condo Insurance Riders

What is not covered by condo insurance? Certain exclusions apply to condo insurance and master policies, meaning certain damage types are not covered. Consider purchasing additional insurance or adding the coverages listed below to your condo policy.

Flood Insurance

Flood damage to a condominium is not covered by insurance. If you reside in a location that is prone to hurricanes or flood damage, you should consider obtaining separate flood insurance.

Earthquake Insurance

Earthquake damage is also not covered by condo insurance. You might be able to add earthquake coverage to your condo policy for a fee, or you could buy a separate earthquake insurance policy.

Second-Home Insurance

Condo insurance is for people who live in their own residences. An insurance policy may not cover a loss that occurs while your condo is vacant for more than 30 days. Second-home insurance is required if your condo is used as a second or vacation home.

Water-Backup Coverage

Condo insurance does not cover water damage caused by sump pumps or drain backups. Water backup coverage can be added to your condo insurance to protect you from this type of loss.

How Much Condo Insurance Do You Need?

To help you determine how much condo insurance you’ll need, here are some things to consider based on what your HOA master policy covers:

  • The cost of rebuilding or repairing your unit once it has been damaged. You’re liable for fixing and replacing objects like cabinets, toilets, built-in bookcases, floors, and light fixtures.
  • The worth of your personal items. Making a home inventory of your belongings is a fantastic approach to figure this out. Item descriptions, purchase dates, estimated values, serial numbers, and receipts are all included in a good house inventory (if available). A written list, images, videos, or a mobile app can all be used to create a home inventory.

When filing an insurance claim, having a home inventory might help you get what you’re entitled to, especially if the claim is significant. You won’t know what to include if you can’t remember everything you have.

Condo Insurance: The Bottom Line

Condo insurance works in tandem with the HOA coverage provided by your homeowners’ organization. Before getting a condo insurance policy, consider the following:

  • Find out what your HOA policy covers at your condominium complex.
  • Determine how much coverage you’ll need for structural parts to be replaced in your home.
  • Calculate the cost of replacing your personal items.

Condo insurance, like homeowners insurance, is a good investment. Ensure you have the right kind of condo insurance for your needs by checking the contracts and bylaws of your condo association. So if you’re asking yourself who offers the best condo insurance, use what you’ve read here in our condominium insurance coverage guide and start researching different companies!

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