What does condo insurance cover?

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Insights:

Condo insurance covers your personal property and offers liability insurance and other protections.

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

Condominium insurance provides protection via personal property coverage, liability coverage, and loss of use coverage.

Investigate what types of condo insurance coverage is right for you, and shop around for insurance companies that offer these policies. Also, understand the differences between what your condo insurance policy includes and what your condo association covers.

Key Takeaways

Condo insurance is similar to homeowners insurance, except it usually doesn’t cover the physical structure.
Personal property coverage is for items like furniture, clothing, electronics, appliances, and valuables.
You can have actual cash value or replacement value coverage, which influences your costs and reimbursement if you file a damage or theft claim with your insurance company.
A condo association’s insurance policy handles the physical structure and any damage or injuries of common areas.
What type of coverage a condo association has affects what coverage you need and how much you pay for condo insurance.

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 condominium 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 in St. Johns, Florida.

“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.

Dwelling coverage not typically part of condo insurance

A standard homeowners insurance policy and a standard condo insurance policy are usually similar. Both protect personal possessions, and provide loss of use and liability insurance.

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 handles 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 in Springfield, Ohio.

Things excluded from a typical condo insurance policy can include coverage for earthquakes, floods, sewer backup, sinkholes, and building collapses. You may be able to obtain protection for these and other exclusions by purchasing extra coverages or separate policies.

Types of condo insurance

Let’s take a look at 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 Brea, California-based Mercury Insurance.

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

Actual cash value

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

By contrast, replacement cost coverage covers items at their replacement cost value today, without deducting depreciation.

“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 for or 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.

Replacement cost value provides more money when you file a claim, but it also costs more money to have that level of coverage.

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 back in the same or similar housing you had before the claim until the damage is repaired or the amount of loss of use coverage is exhausted,” continues 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 a 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.

Master policy affects condo insurance required

Condo associations’ master policies have one of three levels of coverage. What the association covers influences 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 betterments or 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 replacement with like kind and quality materials. If the owner of the unit, or a prior unit owner, 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 with this type of coverage,” says Bakonis.

All-in coverage

All-in, 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 is not covered with their condo association or property management company rather than relying on a more generic phrase like ‘all-inclusive coverage,'” Bakonis advises.

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.

Erik Martin

Contributing Researcher

Erik J. Martin is a Chicago area-based freelance writer whose articles have been published by AARP The Magazine, The Motley Fool, The Costco Connection, USAA, US Chamber of Commerce, Bankrate, The Chicago Tribune, and other publications. He often writes on topics related to insurance, real estate, personal finance, business, technology, health care, and entertainment. Erik also hosts a podcast and publishes several blogs, including Martinspiration.com and Cineversegroup.com.