Homeowners Insurance Basics

What Condo Insurance Covers

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Condo insurance and homeowners insurance are very similar. Both policies provide the owner with coverage for their home itself (a condo or a single-family home), they can replace personal property, and protect against liability claims. However, there are some differences between condo insurance, sometimes referred to as an HO-6 policy, and homeowners insurance.

What Does Condo Insurance Cover?

Condo insurance covers your condo (or co-op) itself. The policy’s structural coverage largely protects the interior of your unit, which includes the floor, interior walls, cabinetry, sinks, tile and any other permanent fixture inside it. If a condo is damaged or completely destroyed by a covered peril (such as a fire), your condo insurance policy will pay up to the coverage limit of the policy purchased. Most people choose a policy to cover the replacement cost value of a condo, or the amount it would cost to rebuild a replica of it. 

When choosing the amount of coverage needed, don't forget to consider the value of any changes to permanent fixtures or construction you might have done. For example, say you've been living in a condo for a couple years and decide to renovate the kitchen. You might need to adjust your condo insurance policy because you, as the condo owner, would need to insure any changes or new structures inside your unit.

An owner’s belongings are also covered by condo insurance and include liability coverage, and loss of use coverage. Theses coverages, and some examples, are detailed below. Condo insurance is generally less expensive than homeowners insurance because the policies don’t cover the exterior of a condo building. Although, depending on the condo or single-family home, the cost to insure one might be much higher than the other. Many factors are used to price both policies.

Something else policyholders need to remember: condo insurance does not cover damages related to earthquakes, floods or sinkholes. Each of those perils are almost always covered by their own independent insurance policy.

Does Condo Insurance Cover My Building?

Condo insurance does not cover the entire building or structure it is part of. As a condo owner, you are only directly responsible for your own space. You only need to consider purchasing a policy that will cover the replacement cost or actual cash value of the condo unit itself. If you have a mortgage, your lender will only require you to have an insurance policy for your condo unit. For example, if you own a condo in a building with 50 other condos, you only need a policy that covers the value of yours.

Generally, everything else (such as exterior buildings, the roof, walls, and elevators) is covered under an insurance policy purchased by the condo association. Commonly called a "master policy," the cost of that insurance is shared by all of the condo owners and is typically included in each owner's recurring condo fees. Again, things such as plumbing inside the walls, hallways, entrances and other common areas are among things that are not the direct responsibility of a condo owner -- whether you are one of three units or 100 units. Those must be insured by a condominium master policy.

Who Covers Common Areas Of Condo Buildings?

Everything outside of the interior structure covered by a unit owner’s condo insurance policy falls under the responsibility of the condo board or association. In addition, to the entrance of a condo building or its hallways, the condo corporation is responsible for maintaining any other amenities affiliated with a community.

For example, the building would be responsible for a workout facility, mailboxes, and any other separate structures such as a tool shed. A community swimming pool or center would also fall under this category. Again, a condo owner doesn’t have to worry about purchasing a personal insurance policy for those things.

Condo owners are indirectly responsible for any common areas (such as entryways, hallways or parking lots) or persons employed (such as a doorman) by a condo building or community. They do not need to personally purchase insurance policies to cover anything outside of their condo unit, nor can they. Instead, their condo board or association -- the body that governs and runs the condo corporation on behalf of the owners -- is responsible for insuring common areas and employees. Condo owners pay monthly or annual fees to the corporation which are then used to cover costs of the community, including the premiums for any insurance policies.

Condo Insurance And Personal Belongings

An owner’s belongings are covered under their condo insurance policy’s personal property coverage. Like homeowners insurance, condo insurance will replace any property belonging to the unit’s owner or family members in the event of a loss, up to the limit of a policy. Typically, the claim limit -- the maximum amount a condo insurance policy will pay -- is about 50% of the coverage purchased for the structure. For example, if a condo has $100,000 of coverage for the structure, the policy likely includes $50,000 of personal property coverage.

Like the structure itself, a condo owner’s belongings are covered by a long list of perils. For example, if a storm breaks a window in a condo unit and rain destroys furniture inside, a condo insurance policy would cover the cost to replace it. Fire, lighting and theft are among other events covered.

Personal property coverage also extends beyond what is inside a condo unit. Condo insurance policyholders can file a claim for belongings that are lost, damaged or stolen outside of their unit. For example, if a condo owner had something in their car that was stolen, they could file a claim for it.

Liability Coverage And Condo Insurance

This coverage is identical to the liability coverage that is part of homeowners and renters insurance policies. It protects the policyholder and their family members (including pets) from lawsuits for bodily injury or property damage.

No matter how big or small a condo is, or how careful a policyholder is, liability coverage is not something they should be without. Accidents happen and even a friend or family member might have to file a lawsuit against you to cover their damages or medical costs. Without liability coverage, a condo owner could be stuck paying out of pocket for major expenses that might be financially devastating. 

Most condo insurance policies include at least $100,000 in liability coverage. Insurance companies almost always allow policyholders to purchase more, usually up to as much as $500,000. If a condo owner needs more coverage than that, they generally would have to purchase an umbrella policy to supplement the liability limit of their condo insurance.

Why Loss Of Use Coverage Is Especially Important

Loss of use coverage (sometimes called additional living expenses) is the least-known benefit of condo insurance, yet it could be extremely valuable to a policyholder. In the event a condo becomes uninhabitable, loss of use coverage reimburses policyholders for qualified expenses. 

For example, if a fire destroys a condo and someone has to get a hotel, loss of use coverage will reimburse them for that expense. It will also cover the cost of meals and, in some cases, additional travel commuting costs incurred. Some condo owners might be more likely to use this coverage than others, considering the high volume of condos in some buildings. A fire or plumbing issues can easily affect more than one condo unit in a building and result in multiple owners filings claims.

Insurance companies have different reimbursement programs. Some will reimburse policyholders up to a certain amount each day, for a set number of days. Others allot a set amount per claim that a policyholder can use at their will.  

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