Condo insurance 101: What you need to know about insuring a condo

If you live in a condo or if you’re going to buy one, you’re probably looking to get some insurance for your home. But perhaps you’ve run into a slight problem: insuring a condominium isn’t quite like insuring a house. Getting the right insurance for a condo can be difficult. But never fear – the information below can help you know what to look for when you embark on your quest to get the best condo insurance. We’ll explain what condo insurance is, what it covers, and how much condo insurance costs.

What exactly is condo insurance?

As we mentioned before, insuring a condominium is a bit different than insuring a house. And that’s why condo insurance exists. (It’s also known as HO-6 insurance because that’s the name of the form used.) Anyways, the reason a condo is different than a house is that you don’t actually own the land, the property, or the building itself. You only own the inside of the condo (the appliances, furniture, cabinets, lighting, plumbing, electrical wiring, etc.) You own the interior of the unit, not the exterior of it. Yes, it’s a little bit weird.

Stick with us:

The fact that you own the inside of the unit only is important because the condo association (we’ll refer to them as the COA to make things easier) should have a master insurance policy. This master policy will cover the building and any common areas – for instance, hallways, pools, tennis courts, and the lobby.

But there’s a catch:

The COA’s master policy does not cover the inside of your unit. And that’s why there’s a need for an HO-6 policy. As a condo owner, it’s important that you know exactly what your COA’s master policy covers. We’ll explain that more in detail later.

What is covered by condo insurance?

1. The interior of the unit.

We explained earlier that you own the inside of the unit. Condo insurance can help you cover losses or damage to the inside of your home – for example, if you have a fire that causes significant damage.

However, you really need to make sure that you understand exactly what the COA’s master policy will cover. The COA policy could be all-in or it could be bare-walls.

  • An all-in COA master policy will cover all items that are original to the unit. That could mean things like cabinets, lighting, fixtures, and plumbing. You would not need to get coverage for the original features of the condo. But – yes, there’s a but – anything that is not original to the unit, such as new floors or cabinets, would not be covered and you would need to be sure to include these things in your personal condo insurance policy.
  • A bare-walls COA master policy means that you need to cover everything except the floor, walls, and ceiling. The COA policy will not cover anything besides literally the walls.

Your condo insurance will protect your belongings and the interior of the unit.

2. Your personal possessions.

The COA master policy will not provide coverage for your personal belongings, so you will need to get insurance for your possessions (your electronics, your clothes, your furniture, and so on) to protect them against losses like fire or burglary. But your personal condo insurance policy can provide coverage for your belongings, so you can get some peace of mind knowing that your treasures are protected. Just make sure you know what losses are and are not covered.

Pro tip: It’s a good idea to insure your personal belongings for their replacement cost (RC) instead of their actual cash value (ACV). RC coverage will allow you to replace your belongings at today’s prices. ACV will only reimburse you for the value of your belongings when the loss occurred, meaning that you would get their depreciated value. That might not be enough to replace your belongings.

3. Liability.

While the COA’s master policy covers common areas, you should have liability coverage in case anyone gets hurt while in your unit. Your condo insurance can help you cover medical and legal expenses if a guest is injured and decides to sue you.

4. Additional expenses.

If a disaster or a fire happened and you weren’t able to live in your condo while it’s being repaired, you’d have to find other accommodations. And those accommodations – for example, a hotel – could be costly. However, if the loss that caused you to move out is a covered loss, your condo insurance might help you cover some of the expenses you have due to not being able to live in your home (like your hotel bill and restaurant bills.)

5. Loss assessment coverage.

Okay, here’s the deal:

If the condo building itself suffers a major loss, the costs could go above the limit of coverage on the COA’s master policy. The COA may need all the condo owners to pitch in and help them cover the expenses left after the policy is exhausted. But if your personal condo policy has loss assessment coverage, your portion of the expense might be partially or fully covered by insurance.

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What will the COA’s master policy cover?

We talked about this a little bit earlier, but just to give a quick summary, the COA’s policy will typically cover:

  • The exterior of the building
  • The common areas of the building (for example, the lobby, the gym, the pool, the elevators)
  • Liability for accidents that occur in the common areas (for example, someone falls in the gym and is injured)

It’s really important that you know exactly what the COA’s policy does and doesn’t cover. Every policy is different, and you don’t want to assume that a certain loss is covered by the COA policy only to be rudely surprised when it isn’t.

How can you find out exactly what the policy covers? One way to get a start is to review the COA’s by-laws. The by-laws are essentially the rules and regulations of the COA for condo owners. The by-laws might list helpful information, such as the COA’s insurance policy deductible. Another good reason to review the by-laws carefully is to see what rules they expect residents to abide by and make sure that you’re okay with them. (It’s best to review the by-laws before closing on the condo.) You may be able to find the COA’s by-laws on their website or by asking them directly for a copy or where to access them.

While we’re on the topic of the COA’s master policy and what is and isn’t cover, let’s break down a loss that can often get very thorny: water damage.

How does the COA policy handle water damage?

It’s a good idea to find out how the COA’s master policy will handle water damage. You need to know what is and isn’t covered for these scenarios, which can happen all-too-easily when you live sandwiched between other condo owners. Water damage that happens in one unit often isn’t limited to just that unit – it can also affect the neighbors. So, what water damage losses are covered and which aren’t? What would you be responsible for if your dishwasher goes haywire and floods your place…and the place next to yours? Yep, water damage can get complicated, grouchy neighbors notwithstanding.

Condo insurance will protect your personal belongings against losses like fires.

So, long story short – find out the details about water damage, what the COA’s policy will cover, and what you would be responsible for if your unit (and others) are affected. This will help you when it comes to getting your own personal condo insurance because you’ll know what you need coverage for and what’s already covered.

How much condo insurance do I need?

That depends on you. How much coverage do you need to protect your personal belongings? How expensive would it be to repair or replace the inside of the condo?

To get a start on figuring out how much condo insurance you need, you can take a home inventory. A home inventory is basically a list of the belongings in each room, along with their value. Remember, you have to include things like…

  • Fixtures
  • Cabinets
  • Plumbing
  • Electrical wiring
  • Appliances
  • Your belongings

Pro tip: Get advice from a trustworthy insurance advisor when getting your condo insurance. COA policies and state laws vary greatly. An experienced insurance advisor can help you figure out what’s covered, what’s not covered, and how much condo insurance you need.

You can take your home inventory online if you prefer to type everything out instead of writing it down.

How much does condo insurance cost?

The cost of condo insurance differs from condo owner to condo owner. Some of the factors that affect the cost are…

  • Where you live
  • What building material the condo is made of
  • What is already covered by the COA’s policy
  • The coverages you select
  • The limits you set
  • Your deductible

Because insurance rates can vary so greatly, the best way to get an accurate idea of how much your condo insurance will cost is to get a quote.

What losses are not covered by condo insurance?

Certain losses will not typically be covered by condo insurance. For instance, the following are usually not included…

  • Wear and tear
  • Earthquakes
  • Flooding
  • Sewer backup

However, that doesn’t mean there’s no way to protect yourself from these losses. You can purchase a separate earthquake policy. You can get flood insurance from the NFIP (National Flood Insurance Program) through an agent. Just be sure to discuss these extra coverages with your agent so that you know your condo is fully protected.

Your condo insurance will cover your liability if someone gets hurt while visiting.

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Whoa. That was a lot of information about condos and condo insurance all at once. If you have any questions about condo insurance or if you want to find out how you can get a condo insurance policy for your home, you can reach out to our team of insurance professionals. We would be happy to chat with you about your insurance. And if you’re looking to get quotes for condo insurance, we can do that, too. We’re here to be a true insurance partner and advisor to each of our clients. To get in touch, all you have to do is fill out our quote form or give us a call today.