Guide to Condo Insurance
There’s always a condominium community for every taste — whether you favour a loft-style condominium conversion, a downtown high-rise, or a small complex in a tranquil setting. Condos often boast amenities like security patrols or swimming pools, and there’s a chance the homeowners association takes care of exterior maintenance and gardening — which adds up to the lifestyle you enjoy.
But there’s a catch; most contracts specify that the association will only pay for damage to the exterior of your condo and common areas. You’re responsible for maintaining and managing everything else inside of the home. If you don’t already carry condo insurance, you may expose yourself and your family to legal and financial risk.
Want to invest in condo insurance but barely know where to begin? MoneyWizard has created your go-to guide on matters condo insurance coverage as well as answers to some frequently asked questions.
What is Condo Insurance?
We like to look at condo insurance as a special kind of insurance that’s designed to offset the liabilities of owning a condominium. Sometimes referred to as HO6 insurance, condo insurance covers your personal items and the interior of your home — from the walls in. It may also cover liability claims as well as additional living expenses if your home is rendered uninhabitable due to a covered peril.
The scope of condo insurance doesn’t extend to common areas in your complex, including sidewalks, hallways, and parking lots — your condo association will have a master insurance policy that covers these things. As a result, we find condo insurance less comprehensive than homeowners insurance since its coverage doesn’t extend to your home’s exterior. And if you live in a condo and are paying for homeowners insurance, you’re probably spending money on duplicate coverage — which is unnecessary and expensive.
Most insurance carriers offer several options to choose from when shopping for condo insurance. The type of insurance you select should typically be based upon your association’s master policy — which outlines what type of damage your condominium association will cover in the event of an incident. The three types of master policies for condominiums are:
- All-in coverage. Also known as all inclusive, this policy is the most comprehensive of all three, and it covers all property in your complex as well as the fixtures in your unit. With this coverage, you’re only required to obtain coverage for your personal items.
- Bare walls coverage. This is probably the most basic of all policies — it covers your units exterior framing plus any collectively owned structures and items. It doesn’t cover the fixtures and appliances inside the condo, hence necessitating that you purchase a more comprehensive policy for your personal items.
- Single entity coverage. This policy covers common areas and the association-owned property while extending coverage to the fixtures in your unit. It doesn’t insure the individual condo owners’ personal possessions and improvements or renovations.
When buying a condo, it’s crucial that you understand the kind of master policy your homeowners association carries and what exactly is covered. You’ll make your decision regarding further coverage based on what isn’t covered under the current condo association’s master policy.
What Does Condo Insurance Cover?
Your condo insurance policy covers what you’re responsible for as a condo owner, including:
- Personal property. Personal property coverage on your condo insurance policy replaces your personal items, such as furniture, clothing, and jewelry if they’re stolen or destroyed by an incident listed in your policy. These listed perils may include fire, theft/vandalism, power surges, wind, and hail. Remember a standard condo policy will cover jewelry and other expensive valuables up to a certain limit — you’ll need to obtain additional coverage if you own expensive items.
- Loss of use. The right condo insurance will never leave you homeless. In case your condo is damaged to the extent of being uninhabitable, loss of use coverage will pay for your temporary living expenses, including hotel bills, rent, and food expenses beyond what you’d generally pay.
- Personal liability. If someone sues you for an accident, injury, or damage to their property while in your premises, personal liability coverage will pay for the legal fees and any damages you’re required to compensate.
- Medical payments. Medical payments coverage settles all related medical expenses if someone else is hurt while in the confines of your condo or its adjacent property. If someone’s injured in a common area, your homeowners association insurance should cover that.
You’ll also want to inquire about optional coverages your policy may include. For instance, you may obtain loss assessment coverage, which reimburses you for your portion of a bill shared among all condo owners for a covered peril, like a fire in your building’s basement.
Water backup coverage may also cover damage by drain back ups or sewer backups, which aren’t covered by your condo policy or flood insurance policy. You may inexpensively obtain more liability protection and wider coverage than is included in your standard condo policy with umbrella liability cover.
You may not be mowing the lawn or vacuuming the driveway, but you still want to take the right steps toward protecting yourself and your investment.
Is Condo Insurance Mandatory?
While condo insurance isn’t mandatory, your mortgage lender and condo association’s by-laws will require that you carry your own insurance on top of the master insurance policy since your ability to repair your unit after a disaster cushions the value of your home.
Your association’s insurance will — at the most basic — cover the bare bones of your original unit, but an individual condo insurance policy will help make up the shortfall.
How Much Is Condo Insurance?
Data from the National Association of Insurance Commissioners puts the average cost of condo insurance at $488 per year. Condo insurance rates will vary widely by states, with factors like location, your claims history, credit score, coverage limits and choices, deductibles, and the condition of your unit affecting your premiums. Most insurance companies provide online condo insurance calculators that can help you easily find the average rates for your area.
Insurance companies may also create avenues for you to lower the cost of your condo insurance policy. For starters, it’s always a good idea to obtain quotes from multiple insurance companies to find the best rates for the coverage that suffices your needs. Inquire about discounts for bundling policies such as auto insurance and condo insurance with the same carrier, or for installing safety devices like smart security systems, alarms, and deadbolt locks.
Choosing a higher deductible can also help you save on premium costs — just ensure you’ll have sufficient money to pay the higher out-of-pocket expense in the event of a disaster.
Frequently Asked Questions
Why do I need condo insurance?
Condo insurance may still come in handy even if your homeowner’s association provides its own coverage. The association’s policy may cover the condominium building, common areas, and liability insurance for the association. But in instances where the policy doesn’t cover you or your possessions from incidents like break ins, water damage, or injuries to a visitor, condo insurance will provide the necessary protection.
Condominium insurance helps protect your personal items and the interior of your individual unit. You’ll also have liability protection for property damage or bodily injury to others.
What happens if a condo burns down?
You’re probably wondering, whose insurance pays when my condo burns down? Well, two different policies may help cover the damages. If your condo burns down, your insurer may have to cover some of the damage and your homeowner’s association may pay for other damage — but responsibilities could vary among condo complexes.
Sometimes, your association’s insurance may protect a condo as it was built, including all its basic fixtures like appliances and fittings. Your individual condo policy would then cover later renovations or upgrades along with your personal items, up to the stipulated policy limits. In other instances, your association’s policy will only cover the basic structural elements of your unit — so coverage for everything else, including kitchen fittings and appliances becomes your responsibility.
The best way to know who bears the responsibility when a condo burns down it to read the association’s documents, including the declarations, bylaws, and the insurance policy fine print — ideally before something goes wrong.
What if I’m renting a condo?
If you’re renting a condo unit, you’ll probably not require a condo insurance policy — your landlord should have that in place. However, you’ll want to purchase renters insurance since it protects your personal items if they’re damaged or stolen. Renters insurance may also include liability coverage, which pays the costs of medical bills or a lawsuit if you’re responsible for someone else’s injuries or property damage.
What’s the difference between condo insurance and homeowners insurance?
Although both condo and homeowners insurance offer similar coverage, the main separating point between the two lies in how much the policy must protect. When you own a condo, you’re typically responsible for only the unit’s interior and your personal property. However, when you own a home, you’re responsible for the inside and outside.
Your insurance representative should help if you have any questions about either homeowners or condo insurance.
