What Is Condo Insurance, and What Does It Cover?

Condo insurance is a type of policy that protects the interior of your condominium, as well as your personal belongings, in the event of damage or theft. It also covers liability costs if a guest is injured while visiting your condo. If your neighbor's pipe bursts and damages your furniture or a thief breaks into your condo and steals your electronics, condo insurance can help cover the costs of repairs or replacements.

In this article, we’ll delve into the ins and outs of condo insurance, including what it does and doesn’t cover and how to ensure you have the right amount of coverage for your needs.

What Is Condo Insurance?

While condo and homeowners insurance share some similarities, they differ in several ways. Condo insurance, also known as an HO6 policy, is designed to protect the interior of your residence and any personal property within the unit. However, unlike a traditional homeowners policy, it doesn’t cover damage to the exterior walls of the building or common areas. The coverage for these areas is provided through a master policy or an HOA policy maintained by the owner of the condominium building or complex.

The term HO6 is used interchangeably with condo insurance, and this type of policy is a modified HO2 policy specifically tailored to meet the needs of condo owners. As a named-peril policy, it lists all the risks that are covered under the policy contract. Your condo insurance and your condo association's master insurance policy work together to ensure your property and belongings are fully protected.

What Does Condo Insurance Cover?

Here’s a breakdown of what a typical condo insurance policy covers:

• Building property: This includes coverage for the unit itself, including walls and fixtures.
• Personal property: Condo insurance provides coverage for furniture, electronics, and other movable goods.
• Personal liability: This offers protection against legal expenses stemming from claims or lawsuits against you.
• Loss of use: Condo insurance covers costs related to lodging or transportation if your unit is uninhabitable due to damage or repairs.
• Loss assessment: This coverage applies to your portion of any losses shared by the condo association.

While an HO6 policy – which is designed expressly for condo owners – only covers the interior structure of a unit from the "walls in," it offers similar coverage to a regular HO3 homeowners insurance policy for personal property, liability, and additional living expenses.

When it comes to hazards, the dwelling and property coverage for a condo insurance policy typically only covers a list of "named perils" such as fire, hail, theft, and vandalism. Any hazards not listed as named perils will not be covered, which means you will be responsible for covering the costs associated with those types of damage.

Building/Dwelling Property Coverage

Property coverage is an essential part of condo insurance, and it protects the structure of your unit. This coverage extends to the walls, floors, ceilings, built-in cabinets, and other fixtures that make up the interior of your condo. In case of damage from covered perils like fire, smoke, water damage, and theft, building/dwelling property coverage can help cover the cost of repairs or replacements.

If a fire breaks out in your condo and damages the walls, floors, and built-in cabinets, building/dwelling property coverage can help pay for the repairs. Without this coverage, you would have to pay for the repairs out of pocket.

Personal Property

If a thief breaks into your condo and steals your TV, computer, and jewelry, or a fire damages your belongings, personal property coverage can help cover the cost of replacing those items. Personal property coverage applies to covered perils like theft, fire, and water damage.

Personal Liability

Personal liability coverage protects you against legal expenses in case of bodily injury or property damage claims against you. Let’s say a guest slips and falls in your condo and sues you for their injuries. Personal liability coverage can help cover your legal fees and any damages up to your policy limit. You’re also protected if you accidentally damage someone else's property.

Loss of Use

Loss of use coverage is intended to assist you in paying for temporary lodging if your condo becomes uninhabitable due to a covered peril. If your condo suffers water damage from a burst pipe and becomes uninhabitable, loss of use coverage can help pay for your hotel expenses while repairs are underway. Bear in mind that this coverage has a daily limit and a maximum amount of coverage.

Loss Assessment

Loss assessment coverage is exclusive to condo owners, and it assists in covering the master policy if a claim surpasses the policy limits. If a fire damages multiple units, and the total cost of the damage exceeds the coverage limit set in the master policy, loss assessment coverage can help pay for a portion of the fire damage.

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What Does a Condo Association or HOA Master Policy Cover?

A condo association or HOA master insurance policy covers the common areas, the exterior of the building, and any other structures the association owns. This type of insurance is typically paid for through monthly HOA or condo association fees, which are assessed to each unit owner. The coverage provided could vary depending on the specifics of the policy, but it generally includes protection for the following:

Bare Walls Coverage

This coverage includes the walls, floors, and ceilings of the building, but it does not include any fixtures or finishes. This means that if there is damage to the walls or floors, the master policy will cover the repairs, but any repairs or replacements to fixtures or finishes will need to be covered by individual unit owners.

If a fire breaks out in the building and damages the walls and floors, the condo association's master policy with bare walls coverage can help pay for the cost of repairing the structure of the building. However, if the cabinets in a unit are damaged, the individual unit owner will be responsible for the cost of repairs or replacement.

Single Entity Coverage

This coverage extends to the building's structure and common areas, including lobbies, hallways, and elevators. This type of coverage typically excludes individual units and any personal property within them.

Let’s look at an example: If a leak in the roof causes water damage to the lobby of the building, the condo association's master policy with single entity coverage can help cover the cost of repairing the damage. However, if the leak causes damage to the interior of a unit, such as to the walls or floor, the individual unit owner will be on the hook for the cost of repairs or replacement.

All-In Coverage

All-in coverage is the most comprehensive type of condo association or HOA master insurance policy, as it covers all property that is collectively owned by the association or is part of the condominium structure. It includes both bare walls and single entity coverage, as well as any fixtures or finishes within individual units.

How would this coverage work? If there's damage to the building structure or common areas, or even to any of the fixtures or finishes in a unit, the condo association's master policy with all-in coverage can help cover the cost of repairs. This is an excellent benefit for unit owners, as it reduces their financial responsibility for any damage to the building and its contents.

What Does Co-Op Insurance Cover

Co-op insurance is designed to provide coverage to residents of a housing co-op. Co-ops are a popular option in major cities like Chicago and New York City, offering residents an alternative to traditional condo ownership. While condos and co-ops share some similarities, they are quite different.

Both condos and co-ops are located in multi-unit structures, but the ownership structure is different. Condo owners own their specific unit, while co-op owners own a share of the entire building and have a lease or contract that allows them to live in their unit. This means that co-op insurance is typically more comprehensive than condo insurance, as it covers not only the interior of the unit and personal belongings, but also the building structure and common areas.

If there’s damage to the building structure or common areas of a co-op building, co-op insurance can help cover the cost of repairs. Additionally, if a shareholder is held liable for damage or injuries on the co-op's property, this type of insurance can help cover legal expenses and damages.

Optional Condo Insurance Coverage

If your standard HO6 condo insurance policy doesn't provide enough coverage, you can opt for additional protection with endorsements or add-ons. Here are some common endorsements you can choose to customize your policy:

• Replacement cost for personal property: This endorsement upgrades the standard policy's "actual cash value" coverage to provide enough payout for you to buy new items in the event of a claim.
• Water backup: If water damages your unit due to a clogged drain or malfunctioning sump pump, this endorsement pays for the damage.
• Scheduled personal property: This endorsement offers extra coverage for valuable items such as jewelry, art, and firearms, which could have limited coverage under the personal property section of your policy.
• Identity theft: Adding this endorsement gives you coverage for legal bills, lost income, or other expenses related to an identity fraud incident.
• Vacant or unoccupied condo: If you don't live in your unit year-round or it's unoccupied while you're waiting to move in, this endorsement provides coverage for damage that may not be covered under a standard policy. (A standard policy may not cover damage to a condo that's left empty for more than 30 to 60 days.)

Overall, endorsements can be a great way to customize your condo insurance policy and ensure you have the protection you need.

How Much Does Condo Insurance Cost?

When it comes to determining the cost of your condo insurance, insurance companies take a lot of different factors into account. These can include where your condo is located, how old it is, and its security features. And, of course, the higher your coverage limits or the lower your deductibles, the more you can expect to pay in premiums.

It's also worth noting that the average cost of condo insurance varies from state to state. According to a 2022 report by the National Association of Insurance Commissioners (NAIC), the average annual premium for condo insurance nationwide is $512. But depending on where you live, you may pay more or less than this amount. 

Ready to purchase condo insurance? An independent insurance agent can help you find a policy that meets your needs.

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FAQs about Condo Insurance Coverage