Home Insurance | Understanding Condo insurance is tricky because it is not quite like a homeowner policy but not a renter's policy either, Condo insurance provides necessary protection for condominium owners when they need it.
To understand condo insurance, you have to start by understanding condominium ownership. Let’s look at when you buy a condo, you are buying an individual unit, and you are also buying a shared interest in the entire condominium property. The entire property is typically governed by a condo association, sometimes known as an HOA, or board. There will be fees you pay to that group that are used to maintain the buildings, common areas and grounds of your condominium complex or building.
As owner of a condominium unit, you buy condo insurance to protect your personal property and provide yourself with liability protection, just like the owner of any home does. Where a condo policy is different from a typical homeowner policy is that most of the physical structure around your unit-- the building your condo is in, its joint operating systems such as a furnace or AC unit, and the grounds around it-- is covered by a master policy held by the condo association.
So, if a storm damages the roof and grounds of your condo building, that's covered by the master policy. If your condo is broken into, your electronics are stolen and some furniture is damaged, that loss would be covered by your own condo insurance. That’s why it is good to be protected for all situations.
Some people liken condo insurance to renter's insurance, but that is not an exact comparison, even though they may include similar coverages. Unlike a renter, if you have a mortgage on your condo, your mortgage company is going to require you to hold condo insurance to protect their investment in your property, it’s wise to protect your investment into your own property too.
And a condo insurance policy, known as an HO-6 policy in the insurance industry, protects more than just your personal property. As a property owner, you have liability when it comes to people in your condo. If a visitor takes a bad fall inside your condo unit and needs medical attention, your condo insurance can help protect you in the event of a claim. Condo insurance also protects you from other losses, including theft of personal property when you are traveling, or loss of use.
Master policy distinctions
Condo associations generally hold one of two types of master policies. So-called "all-in" policies cover the unit's appliances, plumbing, flooring, electrical and fixtures, pretty much everything except your personal property. "Bare-walls-in" policies, on the other hand, don't cover anything contained within your unit's walls, and that may or may not apply to electrical and plumbing, depending on the policy. Remodeling your unit can make a difference too. Some "all-in" policies don't cover upgrades you might make, such as new appliances, hardwood floors or granite countertops.
To know what kind of condo insurance you will need, you should obtain a copy of the master policy and the association by-laws. Read them, and supply them to your insurance agent. This will protect you from unwanted expenses that could occur just from being unaware of your policy.
Liability can be tricky where you share walls, floors, ceilings and even plumbing with others. For example, say you live on the top floor of a condo building whose roof gets damaged. Leaking water ruins your furniture and some artwork. Who is liable? Do you collect on your policy or will it be covered by the association's master policy? If your neighbor's pipe breaks, and your unit is flooded, who is liable? Don’t be afraid to ask questions of the condo association and pose scenarios to get your best understanding what the rules are so you may avoid any unnecessary cost.
Other things you need to know:
- Condo policies do not include flood insurance. Flood insurance is only available through FEMA https://www.floodsmart.gov/ but can be purchased through your insurance agent. Discuss your risk with your agent and be aware: 25 percent of flood claims come from homes in low risk areas. So even if you feel you are low risk it would be good to discuss your flood options with your agent. Flood insurance is not just for properties on the waterfront or in a flood plain. Try and be prepared for every situation.
- If you plan to rent your condo or live in it less than three months a year, you may need different coverage. Be forthcoming with your agent about your plans for the unit; it could make a big difference if you ever have to file a claim.
- If you have collectibles, guns, antiques or other valuables, such as expensive jewelry, you will want to upgrade your policy to make sure you have enough to cover those items in the event of a loss. As discussed before, personal items are not covered by your condo association’s master policy.
- If you work from home, you should let your agent know, and possibly upgrade from a standard condo policy to make sure you have enough coverage for incidentals that come with working from home.
- As a condo owner, you may be assessed for necessary repairs and required maintenance to the entire property, you want to be covered for these kind of incidents.
- While shopping for a condo, keep in mind certain amenities can bring you discounts on your condo insurance, including single entries with passkeys, gated communities, and protective systems like sprinklers, fire and burglar alarms. You can even qualify for a discount by having a good credit and payment history. So be sure to look out for these amenities they could be a huge discount when it comes time to insure your condo.
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