What Condo Owners Need To Know About Insurance – Technologist

It’s estimated that 27% of people in America live in a condo or homeowner’s association (HOA) property. If you’re one of them, then you’re all too familiar with the double-edged sword that is your HOA.

On the one hand, your HOA can ensure that your community is kept to a certain standard. On the other hand, you have dues, rules and guidelines that might not always align with your personal preferences for your home.

And when it comes to protecting your property, an HOA can add confusion to what exactly is your responsibility and what your community covers.

If you’re a condo owner, there are a few things you should know about insurance, including answers to the following:

• What Is Condo Insurance?
• What Is HOA (Master Policy) Insurance?
• What Does Condo Insurance Cover?
• What Does HOA Insurance Cover?
• How Much Condo Insurance Do I Need?

What Is Condo Insurance?

Condo insurance is a type of homeowners insurance policy that is designed to protect the personal property of condo owners. It also provides individual liability coverage to condo owners.

There are eight different types of homeowners insurance policies, which are known as HO-1 through HO-8. Each type, or “form” as they’re called in insurance lingo, is designed to fit the needs of a specific kind of property. Condo insurance is technically known as an HO-6 homeowners insurance policy, which you might also see referred to as unit owners insurance.

Since condos are part of larger communities, which usually include common areas for residents, condo insurance doesn’t typically offer as much — if any — protection for external structures or common areas. Instead, communities have HOA insurance, or master policies, to protect external and shared areas.

Your condo insurance policy is meant to work with your community’s HOA insurance to ensure your unit and community at large are protected.

What Is HOA (Master Policy) Insurance?

HOA insurance — also called a condo master policy or condo association insurance — is insurance maintained by your condominium’s association to protect the structure of the units and common areas in your community.

This policy is paid for with HOA dues. As such, you can (and should) read the policy to know exactly what’s covered. The declarations page will show you what your association is responsible for repairing and/or replacing in the event of unexpected damages or loss to your community or building.

What Does Condo Insurance Cover?

When it comes to condo insurance, your coverage will vary depending on who your insurer is and what you’re willing to pay for. But some basics hold true, regardless of where you buy your policy.

Individual Condo Insurance: Covered Events

The first thing to know is that condo insurance is a named peril policy. A named peril policy means that your policy explicitly lists (or “names”) all of the events (or “perils”) that it will cover. If something is not listed on your policy, then it’s not covered.

The second thing to know: There are 16 perils that a condo insurance policy names, including:

• Accidental discharge or overflow of water (not including water from a sump)
• Accidental and sudden ruptures of built-in appliances
• Aircraft
• Artificially generated electrical currents
• Civic commotion or riot
• Explosion
• Falling objects
• Fire or lightning
• Freezing
• Hail or windstorm
• Smoke
• Theft
• Vandalism and mischief
• Vehicle
• Volcanic eruptions
• Weight of ice, sleet or snow

As you can see, regional events — like earthquakes and floods — are not named. These are great examples of events that a condo insurance policy won’t cover.

Now that we’ve looked at what type of events your policy will protect you from, you might be wondering what parts of your property are actually protected.

Individual Condo Insurance: Types of Coverage

A condo insurance policy usually includes the following coverages:

A condo insurance policy is meant to protect all the things that your community’s master policy doesn’t cover. With this in mind, it’s especially important to know what your master policy covers when it comes to dwelling. That’s because are different levels of coverage that your master policy may include. Knowing what your master covers helps to determine exactly what structures you need protection for with your individual condo insurance policy.

Let’s look more closely at the different levels of coverage an HOA master policy can offer.

What Does HOA Insurance Cover?

Your condo’s master policy includes two types of coverage: liability and dwelling.

Liability coverage on a master policy covers the costs related to injury or damages that occur in common spaces. For example, if someone trips in a common space and decides to seek compensation, a master policy can cover the resulting costs. A few examples of common areas include:

• Courtyards
• Elevators
• Hallways
• Lobbies
• Gyms
• Parking lots
• Stairways
• Swimming pools
• Tennis courts

Dwelling coverage is a bit more complicated. That’s because there are three types of coverage that your HOA can choose from. Your condo’s master policy will have one of the following types of dwelling coverage:

• Bare walls: This coverage is the least inclusive option when it comes to protecting the property of individual units. It only covers the bare structure (flooring, walls, ceiling, roof) of a unit. Bare structure means things like carpet on flooring or cabinets on walls aren’t covered by your HOA’s policy.
• Walls-in: Also known as “single entity coverage,” walls-in offers mid-level protection to your property. It includes your walls, appliances, original fixtures, and may cover some of your personal belongings too. If you’ve made upgrades, however, the upgrades aren’t covered.
• All-in: Also called “all-inclusive,” this coverage is the most robust offering. It pays for everything that walls-in coverage includes. But all-in coverage will also pay to replace upgrades you’ve made to your property.

Depending on what your HOA opts for, you will need to buy more (or less) coverage on your individual condo insurance property.

How Much Condo Insurance Do I Need?

If you’re wondering how much condo insurance you need, start with money expert Clark Howard’s advice:

“Every condo has virtually unique wording on what is the responsibility of the unit owner and what is the responsibility of the association…[The wording] determines what coverage you have to have of your own vs. what [you get] through your [condo’s] monthly association dues. So you have to go to your actual docs to see what exposure you face.”

Essentially, and as always with insurance, the amount of insurance you need is personal and depends on several factors. Here are some questions to ask yourself to help you determine what you need:

• What does my condo’s master policy cover already?
• Do I live in an area that is prone to certain types of disasters that I want protection from?
• How much would it cost to repair or replace all of my belongings that aren’t covered by my condo’s master policy?

Answering these questions will help make sure you don’t pay for coverage you don’t need, but will also prevent you from being underinsured. Homeowners insurance is meant to help you in the event of a catastrophe. So, if the unthinkable happens, you need to have the right types of coverage and sufficient coverage limits for your property.

Final Thoughts

If you live in a condo, then you need a condo insurance policy to protect your personal property. While your HOA will have a master policy, it won’t fully protect everything that’s important to you. Still, your condo’s master policy is meant to work with whatever policy you purchase.

So, be sure to review the declarations on your condo’s master policy. Know what’s covered, look for the gaps and get a policy to fill them.

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