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what-does-condo-insurance-cover

It’s important to have property insurance when you purchase and own a home. Owners of single-family residences obtain traditional homeowners insurance. But condo owners need to get a special type of policy called condo insurance.

Condo insurance provides personal property coverage, liability coverage, and loss of use coverage.

When you’re purchasing condo insurance, shop around with multiple insurers to determine the best policy for you. You may also want to check what your condo insurance policy includes and what your condo association covers.

Key Takeaways

  • Condo insurance (HO-6) covers personal property, liability, and loss of use.
  • Condo insurance includes various components like personal property coverage, personal liability coverage, loss of use coverage, guest medical coverage, and building property coverage.
  • Condo associations have different levels of master policy coverage: bare walls, single entity, and all-in coverage, which impacts the amount of condo insurance coverage you may need.

What condo insurance covers

Whatever type of home you purchase, it’s wise to have sufficient insurance coverage if you suffer a loss or need to file a condo insurance claim. This is true of both detached and attached homes. While a single-family homeowner will secure a homeowners insurance policy, owners of condo units should obtain a condo insurance policy.

A condo insurance policy generally helps pay to repair your unit and replace your belongings if they are stolen or damaged by covered perils, such as fire, lightning, windstorm, smoke, vandalism, theft, and falling objects, says Mark Friedlander, director of corporate communications for the Insurance Information Institute. 

“Condo insurance is intended to cover nearly everything inside the walls of your unit. Your mortgage lender and your condo association bylaws will likely require that you carry individual condo insurance separate from a master condo association policy because your financial ability to repair your condo after a disaster protects the overall value of your unit for you and the condo association,” Friedlander says. 

But unlike a homeowners insurance policy, an individual condo policy doesn’t typically provide dwelling coverage, which is what protects a home’s physical structure. Instead, the master condo association policy covers the physical structure. 

“Condo coverage is usually made up of the interior structure and the interior finishings — which include built-in appliances, flooring such as tile or carpet, and heating and cooling equipment,” says P.J. Miller, partner with Wallace & Turner Insurance.

Coverage for earthquakes, floods, sewer backups, sinkholes, and building collapses are typically excluded from typical condo insurance. You may be able to obtain protection for these and other exclusions by purchasing extra coverages or separate policies.

Types of condo insurance

There are different parts of a standard condo insurance policy:

Personal property coverage

Personal property protection guarantees protection for your appliances, furniture, clothing, electronics, jewelry, artwork, and other personal items.

“Having personal property coverage is critical, as most condo association policies don’t provide coverage for your personal belongings if they are damaged or stolen. This coverage safeguards these household items in the event of fire, theft, or other covered losses,” explains Adam Bakonis, product manager at Mercury Insurance.

You can have personal property insurance for actual cash value or replacement care coverage. 

Actual cash value is insurance protection that pays damages equivalent to the replacement value of your damaged property, minus any depreciation. 

“Say your two-year-old big screen TV is destroyed in a fire. Your claims payment will be based on what that television is worth today, not when you bought it, which could be half the cost or less,” Bakonis adds.

Replacement cost coverage covers items at their replacement cost value today, without deducting depreciation. Replacement cost value provides more money when you file a claim, but it also costs more money to have that level of coverage. 

“Assume your sofa is destroyed in a condo fire. With replacement cost coverage, it can be replaced at full cost, no matter how old it is. You will be compensated with a similar item to the one that was damaged or destroyed, at today’s prices, with this type of coverage in place,” explains Bakonis. 

Personal liability coverage

Personal liability helps you if someone gets injured while visiting your condo and you’re at fault.

“In this scenario, personal liability coverage may help you pay for related legal expenses or your guest’s resulting medical bills,” says Friedlander.

Imagine that a neighbor comes over, trips over a cord lying across your unit’s floor, and breaks her leg.

“Personal injury liability coverage protects you in these instances,” Miller says.

Loss of use coverage

Also known as additional living expense coverage, loss of use coverage pays for temporary shelter, such as lodging costs at a hotel, due to damage to your condo unit by a covered peril that makes your unit temporarily uninhabitable.

“This coverage is designed to put you in the same or similar housing you had until the damage is repaired or the amount of loss of use coverage is exhausted,” says Miller.

Guest medical coverage

Accidents can happen at the worst time, such as when you’re entertaining a friend. Fortunately, medical payments coverage pays for medical expenses for anyone accidentally hurt inside your condo.

“This coverage will pay for things like surgical procedures or hospital stays due to an injury sustained in your unit,” Bakonis says.

Building property coverage

Building property coverage is another important level of protection.

“This type of coverage typically helps pay for repairs to the walls of your condo unit and its interior, which could include items such as built-in bookcases and fixtures, if damage is caused by a covered peril,” Friedlander notes.

Your condo association’s covenants, conditions, and restrictions (CC&Rs) often indicate what the condo association is responsible for and what you’re liable for when it comes to building maintenance, damages, and repairs.

“Depending on the CC&Rs, this may include flooring, cabinetry, fixtures, appliances, walls, windows, wall finishes, and more. In addition, if your condo association carries a large deductible, you may be responsible for damages under the deductible amount,” says Bakonis.

Loss assessment coverage

Loss assessment coverage helps protect a condo owner from paying out-of-pocket if their condo association issues a special assessment for expenses related to an insurance claim outside the walls of their unit.

“This coverage provides additional protection in the event your condo association levies an assessment on each condo owner to make common area repairs for a covered loss,” Bakonis says. The cause of the damage or loss must be due to peril or event covered under your policy.

What does a condo association cover?

While your individual condo insurance policy covers your specific unit and issues related to claims or losses that happen within it, a master condo association policy typically protects the entire building.

Friedlander says the master policy generally covers common areas shared with others in the building for both liability and physical damage, including:

  • Roof
  • Exterior walls
  • Hallways
  • Stairwells
  • Basement
  • Recreation room
  • Elevators
  • Boiler
  • Swimming pool
  • Tennis court
  • Exercise room
  • Parking lot
  • Parking garage

“The property management company or association’s board of directors is responsible for obtaining and maintaining this coverage, and premiums are usually paid for via funds collected from each unit owner’s maintenance fee or association dues,” Friedlander says. 

What are the levels of condo associations’ master policy?

Condo associations master policies have one of three levels of coverage. What the association covers determines how much condo insurance coverage you need. 

The three levels of condo insurance are: 

Bare walls coverage

With bare walls coverage, the condo association is usually only responsible for insuring the bare walls, original floor, and ceiling.

“As the name implies, bare walls coverage protects the structure itself, from the roof and siding or stucco up to the bare interior walls of your unit,” cautions Bakonis. “Damage to your fixtures, cabinetry, appliances, new flooring, or even wallpaper in your unit due to a fire, vandalism, or other loss would generally not be covered by bare walls coverage.”

Single entity coverage

With single entity coverage, the condo association commonly covers the structure and fixtures within each unit as the unit was originally constructed. However, the condo association’s master policy doesn’t provide protection for improvements made since that time.

“For example, if the condo was built with standard grade kitchen cabinets, tile countertops, and rolled vinyl flooring, the association policy would cover the replacement with similar materials. If it’s been upgraded to higher-end cabinetry, granite countertops, and engineered wood flooring, the current unit owner would generally be responsible for the additional cost to insure these upgrades” says Bakonis.

All-in coverage

All-in coverage, also called all-inclusive coverage, frequently covers the structure along with fixtures, installations, and additions to the interior surfaces of your unit. This includes improvements and upgrades to your home.

“However, there can be variations in coverage, so unit owners should verify what is and isn’t covered with their condo association or property management company rather than relying on a more generic phrase like ‘all-inclusive coverage,’” Bakonis advises.

Condo (HO-6) insurance protects condo owners from potential losses and liabilities. It consists of personal property coverage, personal liability protection, loss of use coverage, guest medical coverage, and building property coverage. 

It’s essential to understand the distinctions between individual condo insurance and the condo association’s master policy. The level of coverage the condo association provides—whether bare walls, single entity, or all-in coverage—affects the amount of condo insurance required. Choosing the right coverage and familiarizing yourself with your condo association’s policies will ensure you have the necessary protection.

Frequently Ask Questions

Can you add endorsements to condo insurance?

Additional personal property coverage, such as scheduled personal property, is often available for an extra cost, says Friedlander. 

A standard condo insurance policy typically will cap coverage for theft of jewelry at $2,000, but a scheduled personal property endorsement may provide additional coverage for those precious items. So, if you have valuables beyond your limit, you may want to get an endorsement for more coverage. 

Does flood insurance cover condos?

Standard condo insurance policies don’t cover flood damage. You need to purchase separate flood insurance to protect the cost of your property due to external water damage, especially if you reside in a flood-prone area, says Bakonis.

Can condo owners get umbrella insurance?

Condo owners can increase their liability insurance protection by purchasing personal umbrella liability coverage, says Miller. 

Often sold in increments of $1 million, this extra amount of coverage can protect your home and finances in the event of a lawsuit or serious claim. You may want this if you have assets behind the $500,000 liability coverage limit that’s common in condo insurance. 

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Shivani Gite
Contributing Writer

 
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Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.