“Spending my day researching insurance is the most fun I ever had “
– Said no one, ever.
Purchasing insurance for a condo is more complicated than standard homeowners’ insurance. It is primarily because, as a condo owner, you do not own the building or the land it sits on. The condo is part of a property with multiple units and common areas. So, it becomes difficult for individual owners to understand the type of insurance required and coverage offered by different insurance schemes.
Typically, the condominium association or homeowners association (HOA) is responsible for procuring a master policy that insures the building and pays for any accidents that occur on the property or in the common areas. As a condo owner, you will be expected to pay HOA fees which in turn covers several expenses, including the purchase of the master policy.
Before considering the types of insurance that can be purchased for your condo, let us look at some of the instances where you might need condo insurance.
- Damage to the interior: You do not own the building, but you do own the unit and interiors such as lighting, cabinets, piping, etc. If anything on the inside were to be damaged, you would need an insurance policy.
- Theft: There is a possibility that your belongings such as electronics, jewelry, clothes, etc. are stolen from your condo. In such circumstances, you will need insurance to cover for the stolen or damaged item to replace the same.
- Liability: If a guest or visitor were to be injured within the premises of your condo, your insurance could cover the medical expenses. If a lawsuit were to be filed by the injured person, the insurance would also cover any such liability.
- Loss of Use: There is a possibility that your condo could become uninhabitable due to a disaster such as fire or other natural calamities. During such an event, an insurance cover will reimburse you for the expenses incurred in living elsewhere until such time that your condo becomes habitable. It is important to note that your condo becoming uninhabitable due to floods might not be covered in the policy and will require a separate coverage against damages due to floods.
- Common Areas: Damage to building exteriors, damage to common areas, and any injuries sustained in the common areas will also require an insurance policy to cover for damages and any liability that may arise from a lawsuit.
Different insurance policies are suitable for different situations, and you should consider your individual requirements before buying insurance policy for your condo. So, which are the insurance policies that will be required if any of the possibilities discussed above were to occur?
- Bare walls-in policy: This is the most basic policy which covers the fundamental building structure such as walls, roofs, elevators, and common areas. This is generally the master policy purchased by the condominium association or homeowners association (HOA).
- Single Entity Coverage Policy: This insurance policy covers fixtures in your condo such as wiring, plumbing, carpets, etc. However, this policy does not include any refurbishments or improvements that might have been made inside the structure.
- All In and Inclusive: As the name suggests, this policy covers everything including improvements made by the condo owners. This policy ensures that the unit is restored to its former state, including the changes made to the property by the owner.
- HO6 Policy: The HO6 policy is a comprehensive property and casualty insurance that is designed to work along with the cover offered by the condominium’s master policy. The HO6 policy will cover your unit including every change made inside the unit, personal property in the unit, loss of use, personal liability, and medical payments to others for any untoward incident within the premises of your condo.
- Liability Coverage: The liability coverage protects you from any expenses or lawsuits that may arise from an accident within the premises of your condo. It is essential to understand that while the liability coverage is a part of the insurance purchased by the HOA, it is limited to common areas only.
- Flood Insurance: A flood insurance policy will cover damages caused due to floods. The flood insurance can be purchased for both the unit and the contents of the unit. Standard insurance policies are unlikely to cover damages arising out of weather-related flooding. So, if you live in a low-lying or flood-prone area, it is advisable to purchase separate flood insurance for your condo.
The table above summarizes all of the different insurance events and policies that you may want to purchase. Insurance is an important aspect of modern life and in our opinion ab amazing invention that allows people to share risks. Make sure you are well protected.
As part of our HOA Inspection, we analyze your HOA’s master insurance policy and provide you with recommendations of what coverage you can buy separately. Reach out to us for any questions!
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