What is Condo (HO6) Insurance? What Does it Cover?

What is Condo (HO6) Insurance? What Does it Cover?

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Also known as an HO-6 insurance policy, condo insurance protects condo or co-op units while also providing both personal liability coverage and living expense coverage if a condo becomes uninhabitable. HO-6 policies are also called walls-in coverage because they protect your individual unit, while your condo association or co-op association's master policy covers the building's common areas.

However, standard condo insurance doesn't apply in certain situations, such as floods. You may want to consider additional policies depending upon where your condo is located and how much time you spend there.

What is covered by the condo association or HOA master insurance policy?

Typically, all common areas in a condominium building are covered under a "master insurance policy" purchased by the condo association or homeowners association (HOA) unless stated otherwise by the bylaws. This includes not only the building's roof and exterior but also internal areas such as elevators and hallways.

The cost of the master policy is shared by all unit owners, usually in the form of recurring condo or HOA fees. There are three main types of condo master insurance policies:

  • Bare walls coverage is a limited master insurance policy that covers the structure, as well as most fixtures and furnishings in common areas. It also covers any property that is collectively owned by the condo association.
  • Single entity coverage offers everything included in bare walls coverage and also provides coverage for built-in property such as fixtures in individual condo units.
  • All-in coverage applies to all property collectively owned by the condo association or that is part of the condominium structure. It's the most comprehensive condo master insurance policy, covering all condo improvements and additions.

The type of master insurance policy your HOA or condo association has will directly impact the amount of condo insurance you need to purchase. You should ask the association for a copy of its declaration page, which details the policy and what it covers.

Condo associations may also have other forms of commercial insurance, such as a fidelity insurance policy to cover issues with employee dishonesty, but they don't typically relate to your own insurance needs as a condo unit owner.

What does condo insurance cover?

A typical condo insurance policy provides coverage for the following categories:

  • Building property: The unit itself, including walls and fixtures
  • Personal property: Furniture, electronics and other movable goods
  • Personal liability: Legal expenses from claims or lawsuits against you
  • Loss of use: Costs of lodging/transport if unit is uninhabitable
  • Loss assessment: Your portion of any losses shared out by the association

The main difference between a condo owner's HO-6 policy and a regular HO-3 homeowners insurance policy is that an HO-6 policy only covers the interior structure of a unit from the "walls in." Otherwise, HO-3 and HO-6 policies are quite similar in how they cover personal property, liability and additional living expenses.

Usually, the dwelling and property coverage for a condo will cover a defined list of "named perils" such as fire, hail, theft and vandalism. Any hazards that are not named are not covered, which means you're financially responsible for those types of damage.

Flooding is usually an excluded peril in both condo and homeowners insurance.

However, it is possible to turn your condo insurance into an "open peril" policy by adding a Unit Owners Special Coverage A endorsement. An open peril policy covers damage from any cause except for ones that are named in the policy. Perils frequently named for exclusion from coverage include flooding, earthquakes and sinkholes.

Condo building property coverage

The division of ownership and insurance coverage between condo owners and condo associations can present tricky questions when damage affects more than one area of a condo building.

Condo insurance building property coverage protects the interior of your unit, which includes the floor, interior walls, cabinetry, sinks, tiling and any other permanent fixture. If a condo is damaged or completely destroyed by a covered peril, your condo insurance policy will pay up to the coverage limit of the policy purchased. This is usually equal to the full cost of replacing the unit.

Depending on what areas are affected, an incident can be covered by multiple policies at the same time. A leaky roof — covered by the master policy — might also cause water damage to your unit below, which would then bring your HO-6 policy into play. Similarly, water damage in a neighbor's unit that spreads to you would involve two HO-6 policies.

When choosing your dwelling coverage limit, consider the added value of any new fixtures or construction.

For example, say you renovate your kitchen, adding new finishes and upgrading the fixtures. This increases the value of the unit interior and may put your overall home value over your old dwelling coverage limit.

Condo contents and personal property insurance

A condo owner's belongings are protected by the personal property (or contents) coverage in an HO-6 insurance policy. Like homeowners insurance, condo insurance will help replace any property belonging to the condo owner or family members in the event of a covered loss, up to the policy limit. Covered property can include furniture, clothing, electronics and any other items not permanently attached to the unit.

Typically, the limit for property claims is about 50% of the limit for dwelling coverage.

Like the structure itself, a condo owner’s belongings are covered by a long list of perils. The most important of these named events are fire, lighting and theft.

For example, if a storm breaks a window in your condo, letting rain in to soak your furniture, a condo insurance policy would cover the cost of replacing both the window (structure) and the furniture (personal property).

Personal property coverage isn't limited to things that are located inside the condo unit. You could file a condo insurance claim for belongings that are lost, damaged or stolen outside or while traveling. For example, if you have something stolen out of your car, you could file a condo insurance claim for it.

Condo liability insurance

Condo liability insurance protects you and your family members from lawsuits for bodily injury or property damage. Liability coverage is a core part of every condo insurance policy, as well as every homeowners or renters insurance policy. Without liability coverage, a condo owner could be stuck paying out of pocket for legal expenses that could be financially devastating.

Most condo insurance policies include at least $100,000 in liability coverage. Policyholders can always purchase more, usually up to $500,000. If you need even more liability coverage, you can also purchase an umbrella policy to supplement the liability limit of your condo insurance.

Loss of use coverage

Loss of use coverage (sometimes called additional living expense coverage) isn't as well known as property or structural coverage, but it can be extremely valuable. If your condo becomes uninhabitable due to damage or an evacuation order, loss of use coverage reimburses you for the extra expenses you incur in order to maintain your regular standard of living.

For example, say a fire occurs in your condo, leaving you without a place to stay. Loss of use coverage will pay for your room and board at a different location while it's being repaired — and will sometimes even cover the extra costs of a longer commute.

The terms for loss of use can vary: Some policies reimburse you up to a certain amount each day or for a set number of days, while others allot a maximum amount per claim.

Loss assessment coverage

Loss assessment insurance, also called special assessment coverage, is an optional coverage that you can add to a condo insurance policy. It covers situations in which the unit owners in a condominium are financially responsible for a shared loss, so long as the issue was a covered peril.

For example, if a fire were to damage the lobby of your condo building and end up costing the association more than it has set aside, then special assessment coverage will pay for whatever individual share the unit owners must contribute to make up the difference.

Co-op insurance

If you live in a co-op instead of a condo, you should still purchase a condo insurance (HO-6) policy. The coverage needs are usually the same, but you should still check your building's master policy to see exactly what it covers.

If your building only has bare walls coverage, any upgrades you make will likely not be covered by the master policy. Examples of this might include new kitchen appliances or new countertops. So your condo/co-op policy will have to cover everything inside the walls of the unit.

The main difference between a condo and a co-op is that if you own a condo, you own a unit inside a larger building, while if you own a co-op, you own a part of the building and lease your unit from it. There is no categorical difference between what a condo and a co-op master policy will cover, but what those policies cover can differ by what building you live in.

Flood and earthquake insurance for condos

Condo insurance does not cover damage related to earthquakes, floods or sinkholes. These hazards are regularly excluded from condo policies, and you'll typically need to purchase separate coverage if you live in an at-risk region. You may also be required to purchase certain additional coverages, such as flood insurance, as a mortgage loan requirement.

Vacant condo insurance

If your condo is vacant for an extended period of time, typically at least 30 consecutive days, your condo insurance policy may not cover claims for damage that occurs during the vacancy. Insurers consider unoccupied and vacant properties to be higher risk since issues may not be addressed quickly and break-ins are more likely.

To ensure that your property stays covered, you can purchase vacant condo insurance from your insurer when you intend to be away for more than a month. This often costs extra, but the alternative is to bear the full risk of theft or a peril destroying your property.

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