Condo and co-op homeowners insurance: What you should know

To protect the interior of their unit, condo owners need an HO-6 policy, which covers damage to the interior up to the policy’s coverage limits. This policy also provides liability coverage if someone is injured inside your home. Essentially, an HO-6 is similar to homeowners insurance but tailored specifically to condos.

The rest of the building, including common areas, is covered by a master condo insurance policy, which protects against physical damage from perils such as fire, hail and more. The cost of the master policy is shared among owners through HOA dues.

A master condo policy also includes liability coverage, which pays for medical and legal expenses if someone is injured in common areas, up to the policy’s limits.

It’s important to understand the specific coverage offered by your condo’s master policy, as it can vary. In some cases, the master policy covers standard fixtures in each unit, leaving condo owners responsible only for personal property and any improvements or alterations, like new carpeting.

In other cases, the master policy may only cover the bare walls, requiring owners to repair or replace everything inside their unit, such as cabinets, flooring and bathroom fixtures.

What is an HOA master insurance policy?

The HOA master insurance policy covers the entire building, including your condo and the others within the complex. This coverage is typically funded through a portion of your monthly HOA fees and ensures that in the event of damage or destruction from a covered peril—such as wind or wildfire—the building can be repaired or rebuilt.

“The master policy protects major building components like the foundation, roof, siding, plumbing, and wiring,” says Griffith Harris Jr., owner and principal of Griffith E. Harris Insurance Services. “It ensures that the building can be repaired or rebuilt after a large loss.”

In addition to covering structural damage, a master policy provides liability coverage for medical and legal expenses if guests are injured in the condo community’s common areas.

Your HOA fees also contribute to the maintenance of the building and the upkeep of shared amenities, such as pools, tennis courts and gyms.

It’s important to note that HOA master insurance policies come in a few different types, and the payout can vary. Understanding the differences between them is essential. Here’s a quick overview of the three most common types:

• Bare walls coverage: This type of master policy provides minimal coverage, only protecting the drywall, insulation and studs. As a result, your condo would be rebuilt as an empty shell, and you’ll be responsible for the cost of replacing interior items like cabinets, lighting fixtures, and other finishes.
• Single-entity coverage: This policy offers more comprehensive coverage than a bare walls policy. In addition to rebuilding your condo, it includes coverage for cabinets, bathroom fixtures, and top-flooring. However, you’ll still be responsible for certain items, such as appliances. 
• All-in coverage: This coverage replaces all major building components, including built-in items like cabinets and appliances such as refrigerators, microwaves, ranges and ovens. While it covers the rebuilding of most key elements of your condo, it doesn’t extend to your personal belongings, which are protected under your HO-6 condo insurance policy.

What does HOA insurance cover?

The coverage provided will depend on the type of HOA master policy your condo complex has in place. When purchasing a condo, or if your HOA is changing insurers, it’s essential for condo and co-op owners to review their association’s master insurance policy. This helps ensure they understand what is and isn’t covered.

Typically, the master policy covers physical damage and liability for common areas such as hallways, roofs, basements, elevators, boilers and shared walkways.

Condo and co-op associations can also obtain additional coverage for issues like sewer backups, seepage, floods, earthquakes, employee dishonesty and changes in municipal regulations. For older buildings, liability coverage for claims related to exposure to lead-based paint is another option.

Average condo insurance rates by state

Pricing can vary dramatically depending on the building’s location, age, what it’s made of, as well as the amount of coverage you are looking for. The chart below shows the average cost of condo insurance in each state.

What type of coverage does a condo master policy provide?

A condo master policy protects against a variety of different perils. It offers both liability and property damage coverage as well as other coverages. Here is a brief overview of the various coverages:

Property damage: The property damage portion of the policy will repair or rebuild the condo building if it is damaged or destroyed by a covered peril. The policy will pay to rebuild each unit and common areas, but whether cabinets or appliances are replaced will depend on the type of policy your HOA has put in place. Coverage varies depending on the type of coverage the policy offers. Coverage options typically include bare walls or studs out, single entity and all-in coverage. 

Liability: Liability covers medical and legal bills for injuries that happen to guests in the building’s common areas. For example, if someone slips and falls in the pool area, the liability portion of the master policy would cover their medical bills up to the policy’s coverage limits. The liability section also covers the costs of lawsuits or judgments resulting from injuries up to the policy’s limits. However, it’s important to note that this coverage applies only to common areas and does not extend to the interior of your individual unit.

Other coverages: Most master policies exclude flood damage, so if your area is prone to flooding, your HOA may need a separate flood insurance policy. Additionally, master policies can include other coverages, such as directors’ and officers’ liability for board members and workers’ compensation for HOA employees.

What isn’t covered under a condo master policy?

The type of master policy plays a role in coverage. For example, a bare walls policy will rebuild the walls of your unit, but you’ll be responsible for items like cabinets, light fixtures, appliances, and other built-in features.

It’s important to note that a master policy never covers an owner’s personal belongings inside the unit. To protect your personal items—such as clothing, furniture and electronics—you’ll need a condo insurance policy, also known as an HO-6, which functions similarly to homeowners or renters insurance.

An HO-6 policy typically covers your personal possessions, along with dwelling coverage, loss of use, loss assessment coverage and liability protection in case someone is injured in your unit.

How to get a condo master insurance policy

Establishing a condo master insurance policy is typically the responsibility of the building’s board of directors or management, not something handled by individual unit owners.

“Condo associations choose a master policy based on the building’s replacement cost. At a minimum, it covers the building and common areas but may include equipment, outdoor areas and liability coverage,” says Paul Schneider, president of Schneider Insurance. “The specific coverages and limits can vary significantly between policies based on the association’s needs and budget.”

These policies are sold by major insurance companies such as State Farm and more specialized insurance companies that primarily deal with HOAs. They are complicated and require the board or management team to consider both the cost of insuring the building and the protections needed by the condo owners.

In many cases, these policies can take weeks or months to finalize as buildings and grounds often have to be inspected, and coverage details must be worked out. 

Other condo insurance coverage options to consider

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. Although replacement value coverage costs more, it ensures you can fully replace your items at their current value.

Deductible amount: What deductible level can you comfortably afford? A higher deductible can lower your insurance premiums, but keep in mind you’ll need to cover that higher amount if a claim arises.

Unit or loss assessment: Unit or loss assessment coverage helps protect you if an insured disaster damages your co-op or condo building or if its members face a lawsuit. If the association’s policy doesn’t fully cover the costs, this coverage pays for your share of any assessment charged to all unit owners.

Flood or earthquake: HO-6 homeowners/condo policies generally don’t include coverage for floods or earthquakes. If you live in an area where either might occur, consider adding that 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 a floater. Without a floater, a policy will cover such items 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 various discounts that can lower your premiums. Features like smoke detectors, alarm systems, deadbolt locks, closed-circuit cameras, secured-entry systems, or a doorman may qualify you for savings. Insuring your unit with the same company that provides your building’s insurance can lead to additional discounts, and you might also save with a multi-line discount by bundling your condo/co-op and auto insurance. Other potential discounts may be based on your age or if you’re a non-smoker. Additionally, your building’s location and quality play a role in determining rates, with newer, higher-quality dwellings typically resulting in lower premiums.

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