Condo Insurance

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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 Coverage: 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
impacted 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 cover 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 of 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 ensure 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, lightning, 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 the 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.