Condos are the perfect mix of luxury at a more affordable price. Want a pool but don’t want to maintain it or pay the water bill? Condo living may be for you. Condo living has many other perks, like not having to mow the lawn or pick weeds out of the landscaping. But it can also come with many more unseen risks that homeowners don’t need to worry about.
What happens if your upstairs neighbor overflows the toilet and the water seeps into your unit? Are you prepared to deal with that? Well, condo insurance can be there to save the day for you. This is the ultimate condominium insurance coverage guide that can help you through your specific needs of an HO6 policy, which is just another name for condo insurance.
What Is Condo (HO6) Insurance?
Condo insurance, also known as an HO6 insurance policy, is a type of insurance coverage designed specifically for condo owners. Since condo owners don’t own the building or any property outside of their condo, it is considered a walls-in policy, meaning it covers many things inside the interior walls of your unit.
What Does Condo Insurance Cover?
Condo insurance covers a multitude of different aspects from a number of perils that cause damage or destruction to your individual unit or your personal belongings. Many condo insurance policies come equipped with the following coverages.
1. Personal Liability
Liability coverage protects you and your family by helping to pay for medical bills and legal expenses for any injuries that occur within your condo and you’re held liable for. Each condo insurance policy typically begins with $100,000 of coverage.
If a guest is injured in your unit or just outside your doorway, you could be found liable and be responsible to pay for the damage. But if a guest is injured on common property, loss assessment coverage may kick in. Since personal liability coverage also kicks into action for dog bites, condo owners who also have a dog should opt for more coverage.
2. Personal Property
Personal property coverage helps to protect many personal belongings you keep within your home, including furniture, electronics and clothes. If a covered peril, such as a fire, damages or destroys your things, personal property coverage is what steps in to help you replace these items.
Personal property coverage is either paid out in its replacement cost or actual cash value. Replacement cost reimburses you the exact dollar amount you paid for an item and actual cash value takes the item’s depreciation into your reimbursement, providing you with less than what you paid for it.
3. Loss of Use
If that same theoretical fire that damaged or destroyed your personal belongings also caused your condo to become uninhabitable (unable to live in), loss of use coverage could become your best friend. This coverage helps pay to rent a similar home or hotel room, as well as food, excess storage expenses and many other costs you wouldn’t have had if you were still living in your home.
4. Medical Payments to Others
Somewhat similar to personal liability coverage, medical payments to others coverage helps to pay for medical bills relating to minor injuries that occur within your condo. It typically kicks in when the incident results in $1,000 to $5,000 in medical bills and is oftentimes used in conjunction with the injured person’s health insurance policy.
The big differences between the two coverage types are that medical payments to others typically has a limit of around $5,000 per incident, so it’s used for very minor injuries. Also, you don’t have to be deemed liable for the injury. It can kick in no matter who is at fault.
5. Loss Assessment
Loss assessment coverage is arguably one of the best pieces of an HO6 condo insurance policy. This coverage can help to protect condo owners from having to pay out of pocket for special assessments, which are expenses that typically blindside owners with an unexpected, exponential bill. They occur when the sum of money to repair or rebuild damages exceeds their homeowner association’s master policy limits.
Assessments usually come after a storm or unexpected peril damages part of the condo complex, or when somebody is injured on the property and sues the complex for damages. If a special assessment amount is more than the HOA master policy covers, the remaining amount will be divided among each resident to pay. You have to pay it, too, so loss assessment coverage can be pivotal in helping to keep your money in your pocket.
6. Building Property Protection
If the walls or interior of your condo are damaged or destroyed, building property protection, which is sometimes called dwelling coverage, can step in to pay for the repairs to the walls and many other built-in features, such as light fixtures, built-in bookcases, nooks and other items.
Is Condo Insurance Required?
Condo insurance isn’t technically required by law, but it will likely be required by your lender if you still owe a balance on your mortgage. Additionally, some condo complexes reserve the right to require condo owners to maintain adequate coverage while they own a property there.
How Much Is Condo Insurance?
The average cost of condo insurance fluctuates state by state, but it’s typically around $400 to $800 per year. That’s extremely affordable, especially when you consider how much protection you get. Talk about bang for your buck. Your cost of condo insurance will be determined by which state you live in, how expensive your condo is and many other factors like coverage amounts.
Do I Need Condo Insurance?
While condo insurance isn’t required by law, you should always keep a policy with adequate maximums to ensure your family, belongings and financial wellbeing are all safe and sound — even if you own your unit outright.
You never know when a disaster may strike, especially since your unit may be attached to up to eight other units on all corners. When you do need to use your condo insurance, you’ll be glad you have it.
How Much Condo Insurance Do I Need?
The answer to this question really depends on how much value you have in your personal belongings, whether or not you have a dog and, maybe most importantly, how much coverage your condo association has within the HOA master policy.
If you have $30,000 worth of personal belongings (clothes, furniture, computers, etc.), you’ll want to have at least $30,000 worth of personal property coverage. However, if you only have $10,000 worth of belongings, there’s no point in having $30,000 in coverage. You’d be paying extra for something you don’t need.
Adversely, dog owners are more liable to file a personal liability claim than people who don’t own dogs. The minimum recommended amount of liability coverage is $100,000 for the average person. But, if you own a dog, you may want to opt for upwards of $1 million in coverage by investing in an umbrella policy.
Finally, if your condo association has a low maximum on its master policy, you’ll definitely want to look into loss assessment coverage. In fact, even if the HOA master policy does have adequate coverage, getting loss assessment coverage is still a tremendous idea.
Each of those aspects will affect the cost of your condo insurance policy, so it’s important that you get enough coverage to make sure you’re good to go. But getting too much coverage is simply unnecessary and will cost you more money in the long run.
To determine how much condo insurance you need, you’ll need to factor all the above into your equation and figure out the exact dollar amounts that would give you adequate coverage and peace of mind. Creating a contents list can help get you started on valuing your belongings.
Consider Your Condo Association’s Coverage
Before deciding on a condominium insurance policy, you should always consult with the property manager and secure a copy of the HOA’s master policy. If the policy has low maximums (usually $1 million or less) on their master policy, that means residents could be on the hook for exponential fees.
If a hurricane sweeps in and causes $1.5 million worth of damage to the condo complex and the HOA master policy has a maximum of $1 million per claim, the remaining $500,000 would be the responsibility of the residents to pay and would be divided equally among them. If there are 40 units, each unit owner would be required to pay $12,500 out of their own pocket or risk foreclosure.
But loss assessment coverage is there for you in times like that. It’s designed to pay any special assessment handed down by your HOA up to your policy’s maximum. This inexpensive add-on could wind up saving you thousands of dollars.