Key Differences in Condo Insurance vs. Homeowners Insurance

Just as there are differences between a condominium and a house, there are differences between the insurance you need to protect both types of residences. Even though condo owners do own the homes they live in, a homeowners insurance policy isn’t the right type of coverage.

In the insurance world, condo insurance is referred to as an HO6 policy, while the standard homeowners insurance plan is called an HO3 policy, but also comes in the form of HO1, HO2 and HO5. Like their names would imply, they’ve got some similarities. Let’s compare both to understand where and how they differ.

The main difference between homeowners and condo insurance is how each one covers your dwelling. A condo insurance policy doesn’t concern itself with the structure of your residence very much, since your unit is part of a bigger building that has a master insurance policy. Condo insurance also has one additional section that a homeowners policy doesn’t have called loss assessment coverage.

To fully explain the differences between the two policies, let’s be clear about what each one contains. A standard homeowners insurance plan and a condo insurance policy each contain provisions for dwelling, personal property, loss of use, liability and medical payments coverage.

Homeowners insurance contains coverage for other structures on your property, which a condo insurance plan doesn’t have, and condo insurance contains loss assessment coverage, which you won’t find in a homeowners plan.

Since we’ve mentioned the different aspects of coverage you receive in each policy, let’s go over each section of each plan in depth and highlight where they differ.

Where a condo insurance policy differs starts with dwelling coverage. The dwelling portion of a homeowners insurance plan is a major part of the policy that safeguards the structure of your home, but it’s not as important in condo insurance.

The monthly association dues you pay when living in a condo contribute to a master insurance policy. The master insurance policy covers the structure of the condo complex and the common areas, like the pool, gym, clubhouse and other amenities. 

Since this master policy covers the structure of the building, it eliminates the need for much of the dwelling coverage for your condo. You still need some extent of coverage depending on the type of master policy your association has, as some plans cover more of the interior of your unit than others. 

The exterior of your unit is always protected. But, there are generally two types of protection that your association master policy offers for the inside of your unit: bare walls and all-in. Generally, if you’ve got an all-in association policy, you’ll need less coverage for the surfaces, fixtures and appliances in your unit than if you’ve got a bare walls association plan. 

Other structures coverage in a homeowners plan entails all the permanent features on your property that aren’t part of your house. If you’re in a condo, you don’t have any of these other structures to worry about, like fences, sheds, or detached garages. If they exist in the complex, they’re covered by the master policy. Your condo insurance doesn’t cover them.

Personal property protection is an important part of a homeowners plan, but it’s arguably the most prominent part of your condo insurance. An HO6 policy is mainly concerned with the inside of your unit, which is largely filled with your personal stuff.

The coverage works the same in both policies; it reimburses you if your belongings get damaged by a covered peril. 

You’ll also find loss of use coverage in both policies, and they both work the same way. If you’re forced to move out of your home or unit due to a covered loss, such as a fire or tornado, your loss of use coverage will cover the expenses of a temporary move out. This could include a hotel stay, gas, food and more.

For both policies, your loss of use coverage, sometimes called additional living expenses (ALE), is typically capped between 10% and 30% of your home or unit’s insured value.

Personal liability coverage works the same in both policies, too. If someone got hurt on your property or in your unit that you’re found liable for, this area of your plan will cover medical and legal costs associated with the accident if the person sues you.

The standard amount of liability coverage is generally $100,000 no matter what kind of place you live in, but if you have a dog you might want more than this in case of a potential bite. 

The final aspect in which both plans are similar is medical payments coverage. It covers medical costs if someone gets hurt on your property no matter who is at fault. It’s intended for minor injuries so it’s usually capped around a few thousand dollars worth of coverage.

A loss assessment endorsement is part of a condo insurance plan that you won’t find in homeowners insurance policies. It works to protect you from unexpected assessments from your condo association.

If an area of your complex that’s covered by the master policy is damaged by a covered peril and the damage exceeds the master policy limits, the association typically tries to cover remaining costs by passing the expense on to unit owners in the form of an assessment.

Assessments are almost always a point of contention between residents and the condo board because they’re usually unexpected. You already pay monthly dues as part of living in your condo, you don’t want to pay extra money. If you have loss assessment coverage on your condo policy, it can help pay for these often costly assessments.

This might seem rather straightforward, but we’ll clarify it anyway. If you have a house, you always need homeowners insurance. As mentioned earlier, the HO3 form is the most common type of home insurance, but there are also HO1, HO2 and HO5 forms of homeowners plans available. The former two are cheaper than an HO3 form, but offer much less coverage as a result.

The HO6 form, condo insurance, is for condo owners, co-op tenants and townhouses. There’s no such thing as townhouse insurance. Condo insurance usually gets the job done for townhomes, too, since most townhouses are part of an association that also has a master policy.

Condo insurance is usually cheaper than home insurance, but it’s not always the case. As is typical with insurance, how much you pay varies greatly depending on your location, age of your residence, claims history, amount of coverage you have and much more. For condos, the size of your community and coverage of your master policy also play a role. 

For example, it’s possible that an insurance plan in Florida for an old condo on the coast could cost more than a home insurance policy for a new house in Vermont due to the inherent weather risks and age of the structure in Florida. 

Condo owners tend to have less to insure overall since they’re living in and responsible for a smaller space, but the cost difference between homeowners and condo insurance can vary.