How Much Dwelling Coverage Do I Need For a Condo?

The coverage maximums required by condo owners differ quite a bit from those who own houses. But the importance of securing coverage — at the right amounts — is just as imperative in both scenarios.

Condo owners are only responsible for protecting the inside of their unit with condo insurance since the HOA covers everything outside the four walls of the unit. But figuring out exactly how much condo dwelling coverage you need can be tricky. Let’s take a look.

The amount of HO-6 dwelling coverage, or dwelling coverage for a condo, each owner needs is greatly dependent on three factors: whether they still owe money on the mortgage, how much the condo association’s master insurance policy covers, and whether they purchase an all-in or bare-walls policy are the three deciding factors.

Dwelling coverage is designed to protect the structure of your unit—such as the carpet, floors, and countertops—and built-in fixtures from a number of perils that could damage the interior.

Condo owners who still carry a mortgage on their property are required to purchase and maintain condo insurance until they’ve paid off the loan in full. However, we recommend keeping a policy in place while you live there always, even if you pay off your loan. If you drop your coverage, you’ll be financially responsible for paying for any damage to your possessions and unit.

Second up is the condo association’s master policy. You help pay for this policy in your monthly HOA dues. That policy is designed to protect the exterior structure of the buildings, all common areas and much more. However, the master policy only kicks in to protect your unit if you’ve opted for an all-in policy. But we’ll get to that shortly.

Lastly, every condo owner needs a different amount of dwelling coverage. The amount each owner needs depends on their master policy type (and how much their condo is valued). Let’s look at what each type of condo dwelling coverage protects.

An all-in condo insurance policy is the cream of the crop. This is because the condo association’s master policy insures the exterior and interior of your unit, including the fixtures built into or attached to the walls, such as kitchen cabinets, countertops, bathtubs and showers.

It’s an all-inclusive policy that calls for less dwelling coverage for you because, as the condo owner, you’re not responsible for covering as much. Your monthly HOA fees are designed to do that. However, it’s always wise to consult your insurance agent to determine exactly what’s covered and how much coverage you need before purchasing a policy.

A bare-walls condo insurance policy requires you to protect everything inside the walls of your unit. That means you’ll need enough dwelling coverage to repair or rebuild things like the kitchen cabinets, countertops, bathtubs and showers if a covered peril damages them.

The HOA’s master policy still protects the outside of your unit, though. So, those condo owners with bare-walls master coverage will undoubtedly need more dwelling insurance than their all-in counterparts.

Calculating the dwelling coverage for a townhouse or condo, as long as you have an HO-6 policy, is based on two principles: how much it would cost to completely rebuild your unit and its current square footage. You’d likely only need dwelling coverage that represents 20% of your unit’s value, and the square footage method is based on repairing your unit to $100 per square foot.

The 20% method is the most common for calculating how much dwelling coverage you’ll need for a condo. Since you don’t own the exterior of your unit, its ideology is that you’d only need to pay 20% to rebuild your entire unit if it were entirely destroyed. So, condo owners with a unit valued at $300,000 would only need $60,000 in dwelling coverage.

The square footage method is based on each square foot area of your condo equaling $100. It can be a bit outdated, especially in areas where housing prices are inflated, so it’s best to consult your agent to figure out if this is enough coverage to rebuild the interior of your unit if it’s destroyed by a covered peril.

The math behind it is simple. Let’s say the same condo owner with a unit worth $300,000 also has 800 square feet. In that case, you’d multiply $100 per square foot by the total square feet to get the dwelling coverage, which would be $80,000.

Condo insurance dwelling coverage protects against a variety of external and internal perils that could cause damage to your unit.

This includes things like hurricanes, tornadoes, water damage and fires.

Let’s say you accidentally start a kitchen fire that destroys your kitchen cabinets and countertops. If you have a bare walls condo policy, you’d have to file a condo insurance claim and, if your insurer deems the damage to be covered, you’d get a payout from your insurer to repair it.

If you have an all-in policy, you’d likely file a claim with your condo association’s master policy to receive your payout. 

Homeowners insurance and condo insurance are two different policies. Condo owners will never need a homeowners insurance policy. They’ll simply need to invest in an adequate condo insurance policy that protects all their needs.

Homeowners insurance, or primarily HO-3, HO-5, and HO-8 policies, are designed to protect one’s single-family home and property. Condo insurance, or an HO-6 policy, often called unit-owners insurance, is designed to protect the unit you own, while leaving protection for the building and the property it’s built on up to the building manager. 

If you’re a condo renter, you’ll probably see HO-4 policies most often, as these are renters insurance policies designed to protect the items you own without protecting the structure of your dwelling, as that’s up to your landlord. 

While many home insurance policies, whether homeowners, condo, or renters, protect your personal belongings, each policy will differ in some way. For example, condo insurance policies differ from homeowners insurance policies in that they provide a coverage called loss assessment coverage. Loss assessment coverage helps unit owners kick in for expenses they may owe that aren’t fully covered by the condo association’s policy.

Home insurance policies aim to protect your unique needs, no matter what type of home you live in. Thus, condo insurance and homeowners insurance have their similarities, but they also have their differences.