Condo insurance is a type of insurance policy bought by owners of condominium units. As with homeowner’s insurance, it offers coverage for certain events that result in the damage or loss of your property, including fire, strong winds, theft, and vandalism.
Do You Need Condo Insurance?
Condo insurance, or HO-6 insurance, is typically required when obtaining a mortgage for a condo. Lenders require insurance to protect their investments.
Homeowner’s and condo associations may also require unit owners to obtain specific types of insurance coverage or limits.
For those without a mortgage or insurance requirements, obtaining condo insurance is still recommended. It protects your assets in the event of a disaster or crime.
What’s Covered by Condominium Insurance?
Condo coverage typically covers damage from fire and weather-related events, such as lightning, windstorms, hail, and severe weather. Most plans also cover vandalism and theft.
The types of situations covered by the insurance depend on the coverage type, including dwelling, personal property, and other coverage options. Here’s a closer look.
Dwelling Coverage
Dwelling coverage pays for repairs if your condo is damaged due to an issue covered by your insurance.
It’s typically part of an individual unit owner’s policy to protect the interior structure of the unit. It protects against damage due to fire, vandalism, and certain types of water damage. It’s intended to cover the walls, floors, ceilings, fixtures, and appliances not insured by the condo association's master policy.
Liability Coverage
Liability coverage protects you against claims for bodily injury or property damage that occur in your unit. This coverage helps cover legal costs and damages if you're found legally responsible. With this coverage, you’re safeguarded from out-of-pocket expenses in lawsuits related to accidents or injuries, giving you greater financial protection.
Personal Property Coverage
Personal property coverage protects your belongings and personal items in the event of loss or damage due to the same types of issues covered with your dwelling coverage. It may also extend to your furniture, electronics, clothing, and other personal possessions. It ensures that you can receive compensation in case these items are damaged or lost.
Loss of Use Coverage
Loss of use coverage gives you financial assistance if your unit becomes uninhabitable due to a covered event, such as a fire or severe weather damage. You typically get payments to help cover additional living expenses while the condo is being repaired or rebuilt. This may include temporary housing, meals, and transportation costs. With loss of use coverage, you can maintain a comparable standard of living during your displacement.
Loss Assessment
Loss assessment coverage protects against special assessments levied by the homeowner’s association (HOA). These assessments typically occur due to losses to common areas or shared property when the main policy doesn’t cover the full cost of repairs or replacement. This coverage can help pay the owner’s share of the costs, reducing out-of-pocket expenses for unexpected repairs or legal judgments.
What’s Not Covered by Condominium Insurance?
Condo insurance policies don’t cover all natural events. Dwelling coverage is unlikely to cover earthquakes, flooding, and general wear and tear. Most policies don’t cover damage from termites and pests either.
Your insurance policy is meant to cover damage to your unit. Any shared areas are the responsibility of the condo association, which typically has a separate insurance policy. A portion of your condo association fees may go toward this insurance.
What’s a Master Policy?
A master policy, which is also known as a homeowner’s association (HOA) insurance policy, helps cover damages in common areas. It pays for repairs and upgrades to communal spaces, such as swimming pools and gyms.
There are also several types of master policies available for the property owner:
- All-inclusive coverage
- Bare-wall coverage
- Single-entity coverage
All-inclusive coverage covers all property and fixtures in the condo. If the property owner has all-inclusive coverage, the condo unit owners are only responsible for covering their personal items.
Bare-wall coverage only covers shared areas. It doesn’t cover interior walls or fixtures inside your condo unit. Single-entity coverage offers a little more protection compared to bare-wall coverage, as it covers all fixtures inside your unit.
What’s the Difference Between HOA and HO6 Insurance?
HOA insurance is obtained by the owner of the complex. HO6 insurance is obtained by the owners of the individual condo units.
HOA policies cover outdoor spaces, recreational areas, and common spaces. HO6 policies cover your individual unit, including floors, plumbing, and inner walls. HO6 insurance also covers your personal belongings and valuables.
How High of a Limit Do I Need for Condo Insurance?
Selecting the right limit for condo insurance depends on the type of coverage, the master policy coverage, and the value of your assets.
For example, if your condo’s master policy is all-inclusive, you may not need a high limit for dwelling coverage. However, if the master policy has bare-wall coverage, your dwelling coverage is needed to cover the replacement of appliances, fixtures, and other elements inside your condo.
Personal property coverage insures your personal items. If you have $50,000 in assets stored in your condo, you'll want at least the same amount to cover the potential loss of those items.
The limit for liability coverage often ranges from $100,000 to $500,000. The amount that you choose should cover all your assets, including all bank accounts and retirement accounts. In the event that an injury occurs on your property, you need liability coverage to protect against the loss of your assets.
Loss of use coverage is typically limited to a fraction of your dwelling and personal property coverage limits. For example, an insurance company may limit you to getting 20% of the total of the two coverages.
How Much Does Condo Insurance Cost?
The average cost of condo insurance in the United States is $43 to $61 per month. However, the cost of condominium insurance can vary greatly depending on where you live and your coverage options, including the deductible that you select.
In the end, condo insurance is often necessary and recommended, as it offers protection in case you suffer damage to your condo. It’s a small price to pay for peace of mind and security against unforeseen events.
