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The basics of condo and co-op insurance

If you think insurance for your condominium is covered by your association fees, think again. Typically, your monthly condo fees are used to fund a building insurance policy. This generally provides coverage for perils outside of your unit like the building’s structure and covers liability if someone is hurt on the property outdoors.

But if your unit is robbed or damaged, building insurance will not provide coverage for your personal possessions. You also won’t have protection from personal liability if someone is injured inside your unit. To protect your belongings and yourself, you need to purchase a personal home insurance policy for condos (called an HO-6).

Insuring the building

Condo and co-op owners should first review their association's master insurance policy to find out what that policy covers, and what it doesn't. In most cases, that building insurance policy should cover physical damage and liability for common areas such as the hallways, roof, basement, elevator, boiler and common walkways. Co-ops and condominium associations also can obtain coverage for sewer backups, seepage, floods, earthquakes, employee dishonesty and changes in municipal rules and regulations. For older buildings, another option is liability coverage for claims resulting from exposure to lead-based paint.

In some cases, the building association's insurance policy also covers the standard fixtures in each unit. The condo owner might only be responsible for personal property inside the unit and for any additions or alterations made to the original structure, such as new carpeting. In other situations, the building policy covers only the bare walls, leaving condo owners responsible for insuring anything inside a unit such as cabinets, carpeting and bathroom fixtures.

Insuring the condo and your belongings

Under the general terms of HO-6 condominium owner coverage, your policy should cover your personal property from 16 perils:

• Fire or lightning

•  Windstorm or hail

• Explosion

• Riot or civil commotion

• Damage caused by aircraft

• Damage caused by vehicles

• Smoke

•  Vandalism or malicious mischief

•  Theft

•  Volcanic eruption

• Falling objects

•  Weight of ice, snow, or sleet

•  Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance.

• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.

•  Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.

• Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)

A basic condo/co-op policy should also provide liability protection for incidents such as someone tripping and falling while inside your unit. In addition, if a covered peril should make your condo or co-op uninhabitable, your policy should include a provision to cover additional living expenses incurred if you have to find temporary shelter elsewhere.

When discussing your policy with your agent or insurance company, make sure you have enough liability coverage.

Options to ask about

Cash or replacement value: You can insure your personal possessions for either the cash value or their replacement cost. With cash value coverage, you receive the value of the item minus depreciation, while replacement value pays the current cost to replace the item.

Deductible amount: What level of deductible can you afford? A higher deductible can mean lower insurance premiums, but if something happens, be prepared to pay out that high amount.

Unit or loss assessment: If your co-op or condo building is damaged by an insured disaster or its members are sued, and the cost of that damage is not fully covered by the association's policy, this type of coverage would pay for your share of an assessment charged to all unit owners.

Flood or earthquake: Generally HO-6 homeowners/condo policies do not include coverage for either floods or earthquakes. If you live in an area where either might occur, consider adding coverage.

Floaters: Most policies set limits for items like jewelry, collectibles, and computers. If you own expensive items, you can pay extra premiums to have those items fully insured under what is called a floater. Without a floater, a policy will cover such items only under general categories and offer reimbursement up to a maximum of only a few thousand dollars (limits vary). For example, a standard policy may cover only up to $1,000 for jewelry without a floater.

Discounts: Insurance companies offer an array of discounts. Factors that could reduce your premiums include smoke detectors, alarm systems, deadbolt locks, closed-circuit television, a secured-entry system or a doorman. If you insure your unit with the same company that underwrites your building's insurance policy, you might get an additional reduction in premium. You also could qualify for a multi-line discount if you purchase your condo/co-op and auto insurance from the same company. More discounts might be available depending on your age or whether you're a non-smoker. Building location may play a role in your rates. Typically, the better quality and newer the dwelling, the lower your premiums will be.

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