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What is Condo (HO6) Insurance? What Does it Cover?
Condo insurance, also known as an HO6 insurance policy, provides condo unit owners coverage for their properties, protects against liability claims and helps cover costs if the unit is uninhabitable. A condominium insurance policy is often called walls-in coverage, as it protects the individual unit, whereas your condo association's master policy generally covers all common areas. However, standard condo insurance doesn't offer coverage for all situations, such as floods, so you may want to consider additional policies depending upon where your condo is located and how much time you spend there.
What is Covered by the Condo Association or HOA Master Insurance Policy?
All common areas, the condominium building's structure and many internal features, such as the roof, walls and elevators, are generally covered under an insurance policy purchased by the condo association or HOA. Commonly called a "master insurance policy," the cost is shared by all of the condo owners and is typically included in each unit owner's recurring condo or HOA fees. For example, any damages to the exterior of a condo building, such as the roof after a storm, would be the responsibility of the condo association, rather than any individual unit owners.
There are three main types of condo master insurance policies:
Bare Walls Coverage
Bare walls insurance coverage is a limited master insurance policy that covers the structure, as well as most fixtures and furnishings in common areas. It also covers any property that is collectively owned by the condo association.
Single Entity Coverage
Single entity insurance is an extended version of bare walls insurance. It also provides coverage for most built-in property, such as fixtures in individual condo units.
All-in insurance covers all property collectively owned by the condo association or that is part of the condominium structure, and it is the most comprehensive condo master insurance policy. All condo improvements and additions are covered, so an individual unit owner would only need to purchase additional coverage for their own personal property.
The type of master insurance policy your condo association or HOA has directly impacts the amount of condo insurance you'd need to purchase, so you should ask the association for a copy of its declaration page. This page will list key information about the policy and what it covers. Condo associations may also have other forms of commercial insurance, such as a fidelity insurance policy, which covers issues of employee dishonesty, but they don't typically relate to your own insurance needs as a condo unit owner.
What Does Condo Insurance Cover?
A condo owners insurance policy isn't mandatory by law, but your condo association may have minimum requirements for coverage. Similarly, if you have a mortgage, your lender will generally require you to have an insurance policy for your condo unit. An individual condo unit owner's insurance policy, an HO6 policy, is often referred to as "walls-in" insurance, as it covers the interior structure of the unit as well as your personal property. It also typically offers liability and loss of use coverage—liability coverage in case someone is injured or their property is damaged and they decide to sue you and loss of use coverage, in the event you can't reside in your condo for a period of time.
So, if a condo owner somehow damages the wood floor in their unit, they would file a claim with their own insurer to repair the damages. Flooring inside a condo is covered as part of the interior of the unit, along with any personal belongings. However, if the flooring inside a communal area of a condo building—such as an entryway—is damaged, the condo board or association would be responsible for that repair.
There are also features of a condominium which, if damaged or faulty, can either be covered by your own policy or your association's master policy, which is why it's good to be familiar with both. For example, a plumbing issue could either be the responsibility of the condo unit owner or the association, depending on where it's located. Similarly, water damage may fall under one or multiple condo insurance policies. If it was caused by your own water heater or air conditioning system, you would file a claim under your own policy. But water damage caused by a leak in the roof, or which occurred due to an issue in your neighbor's unit, could fall under either the master policy, your neighbor's policy, or a combination of your own coverage and another policy.
A condo insurance policy's dwelling and property coverage generally covers a defined list of "named perils," or hazards, such as fire, hail, theft and vandalism. Any hazards that are not included in the list of named perils would not be covered, so you would be responsible for the resulting damages to your dwelling and property. However, you can add a Unit Owners Special Coverage A endorsement to your policy, which would make it an "open peril" policy. Open peril condo policies cover damages from any cause except those specifically excluded, which would typically be limited to certain hazards such as flooding, earthquakes and sinkholes.
Condo Building Property Coverage
Condo insurance building property coverage largely protects the interior of your unit, which includes the floor, interior walls, cabinetry, sinks, tile and any other permanent fixture inside it. If a condo is damaged or completely destroyed by a covered peril, your condo insurance policy will pay up to the coverage limit of the policy purchased. Most people choose a policy to cover the replacement cost value of a condo, or the amount it would cost to rebuild a replica of it.
When choosing the amount of dwelling coverage needed, don't forget to consider the value of any changes to permanent fixtures or construction you might have done. For example, say you've been living in a condo for a couple years and decide to renovate the kitchen. You might need to adjust your condo insurance policy because you, as the condo owner, would need to insure any changes or new structures inside your unit.
Also keep in mind that if the construction affects any common areas of a building, you should consult the condo association, as they have certain responsibilities toward those areas. An example might be if you want to change the front door to your unit. The door and entryway is likely the responsibility of the condo association, so you would need permission to make changes to it. Changes to interior walls or construction are more simple, as those changes would be your responsibility.
Condo Liability Insurance
Condo liability insurance protects the policyholder and their family members (including pets) from lawsuits for bodily injury or property damage. Liability coverage is a core party of every condo insurance policy, as it is for homeowners and renters insurance, as accidents happen. Even a friend or family member might have to file a lawsuit against you to cover their damages or medical costs. Without liability coverage, a condo owner could be stuck paying out of pocket for major expenses that might be financially devastating.
Most condo insurance policies include at least $100,000 in liability coverage. Condo insurance companies almost always allow policyholders to purchase more, usually up to as much as $500,000. If a condo owner needs more coverage than that, they generally would have to purchase an umbrella policy to supplement the liability limit of their condo insurance.
Condo Contents and Personal Property Insurance
An owner’s belongings are covered under their condo insurance policy’s contents, or personal property, coverage. Like homeowners insurance, condo insurance will replace any property belonging to the unit’s owner or family members in the event of a loss, up to the limit of the policy. Covered property can include your furniture, clothing, decorations and any other items not affixed to the unit. Typically, the claim limit—the maximum amount a condo insurance policy will pay—is about 50% of the dwelling coverage purchased. For example, if a condo has $100,000 of coverage for the structure, the policy likely includes $50,000 of condo contents insurance.
Like the structure itself, a condo owner’s belongings are covered by a long list of perils. For example, if a storm breaks a window in a condo unit and rain destroys furniture inside, a condo insurance policy would cover the cost to replace it. Fire, lighting and theft are among other events covered.
Personal property coverage also extends beyond what is inside a condo unit. Condo insurance policyholders can file a claim for belongings that are lost, damaged or stolen outside of their units. For example, if a condo owner had something stolen from their car, they could file a claim for it.
Loss of Use Coverage
Loss of use coverage (sometimes called additional living expenses) is the least-known benefit of condo insurance, yet it could be extremely valuable to a policyholder. In the event a condo becomes uninhabitable, loss of use coverage reimburses policyholders for qualified expenses.
For example, if a fire destroys a condo and you have to stay in a hotel, loss of use coverage will reimburse you for that expense. It will also cover the cost of meals and, in some cases, additional travel commuting costs incurred. Condo insurance companies have different reimbursement programs. Some will reimburse policyholders up to a certain amount each day, for a set number of days. Others allot a set amount per claim that a policyholder can use at their will.
Loss Assessment Coverage
Loss assessment insurance, also called special assessment coverage, is an optional coverage that you can add to a condo insurance policy. It covers situations in which the unit owners in a condominium are financially responsible for a shared loss, so long as the issue was a covered peril. For example, special assessment condo insurance might cover cost of damages from a fire in the lobby if it exceeds the money your association has available for repairs.
Flood & Earthquake Insurance for Condos
Condo insurance does not cover damages related to earthquakes, floods or sinkholes. These hazards are regularly excluded from condo policies, and you'll typically need to purchase separate coverage if you live in an at-risk region. You may also be required to purchase certain additional coverages, such as flood insurance, as a mortgage loan requirement.
Vacant Condo Insurance
If your condo is vacant for an extended period of time, typically at least 30 days at a time, your condo insurance policy may not cover claims if the damages occurred while it was unoccupied. Insurers consider unoccupied and vacant properties to be higher risk, since issues may not be addressed quickly and break-ins are more likely.
You can purchase vacant condo insurance from your insurer if you intend to be away for more than a couple weeks to ensure that your property stays covered. This will typically cost a bit more, but you otherwise risk theft or a peril destroying your property and not being financially protected.