- A condo’s master insurance policy includes coverage for the building and all common areas.
- You’ll need to purchase condo insurance to cover your individual unit.
- The amount of condo insurance you need depends on your condo’s age, appraised value, size, location, and more.
- The average annual condo insurance premium in the United States in 2017 was $488, according to the National Association of Insurance Commissioners (NAIC).
- See Business Insider’s picks for best homeowners insurance companies.
There are several different types of homeowners insurance depending on the type of home you live in. If you live in a condo or co-op, you’ll need condo insurance, but before you decide how much insurance to get, you’ll want to understand how condo insurance is different from other types of homeowners insurance.
It will help to know what kind of master policy your condo association has, too.
Dwelling coverage is the part of a homeowners insurance policy that can help cover the cost to repair or rebuild your home if it is damaged. In insurance terms, your dwelling consists of your home and any other structures on the property, like a garage or shed. The type of dwelling coverage you have depends on the type of homeowners insurance you have.
For condos and co-ops, the condominium association owns the building and common areas — and these areas are covered under the condo association’s master policy. Condo or co-op owners contribute to the master policy insurance coverage through the assessments they pay to the condo association.
If you’re a condo owner, the cost to repair your individual unit is covered under the condo insurance you purchase yourself. Do not confuse condo insurance with your condo association’s master policy. The master policy covers the condo building itself, but condo insurance covers your unit. If the association’s coverage isn’t enough should there be an accident or event, the association will ask for additional payment from each condo owner and loss of assessment coverage helps condo owners cover those payments.
Although the condo association’s master policy covers the building and common areas, your assessment payments do not cover the contents of your unit, injuries that occur in your unit, or damage to your unit.
There are 3 types of condo master policies
If you’re a condo owner, you need to find out what type of master policy your condo association or HOA has to cover the building. No matter what master policy is used, the exterior walls and hallways are considered common areas and would fall under your condo association’s master policy.
Check your condo association’s by-laws to determine whether the master policy has bare walls, single entity, or all-in coverage.
Data from Hippo Insurance
An “all-in” master policy covers external structures, common areas, liability, fixture repairs, replacements and even upgrades made by individual owners, according to Hippo Insurance, but a “bare walls” master policy covers only external structures and common areas. Single entity coverage goes beyond bare walls “by shielding condo owners from liability to replace or repair original fixtures inside each unit, per Hippo Insurance.
Condo insurance doesn’t cover an underinsured condo master policy. If the condo association’s master policy is underinsured (i.e., it’s a bare walls policy) and an event triggers the policy, anything not covered by the master policy will be charged to unit owners via a special assessment. Your condo insurance’s loss of assessment coverage may assist in covering this cost — be sure to check your condo insurance policy and ask your agent about limits to the loss of assessment coverage.
Condo insurance, also known as HO-6 coverage, is referred to as “walls-in” coverage because it covers everything inside your walls, whether that’s your property, your liability, or damage inside your unit.
Plus, condo and co-op owners get a specific type of coverage called loss of assessment, which kicks in to cover any additional costs that may be requested should the condo association’s own coverage fall short.
*Consult condo association by-laws
**Available as add-on coverage if not part of policy.
The cost to repair your condo depends on the age of your condo, the appraised value of your condo, location, and size of your condo. Additionally, the condo association’s by-law may require a minimum coverage amount for unit owners.
According to the Condominium/Cooperative Unit Owner’s Insurance Report by the National Association of Insurance Commissioners (NAIC), the average annual condo insurance premium in the United States in 2017 was $488.
Homes located in weather zones or disaster-prone areas — flood zones, hurricanes, tornadoes, wildfires, mudslides, hail, and earthquakes — will have increased premiums because these types of events are not included in basic coverage and will need to be add-on riders.
Data from the NAIC
It is recommended that you review your policy coverage yearly, and if your homeowners insurance company hasn’t provided the level of service you expected, it could be time for you to select a new provider. Read Business Insider’s picks for best homeowners insurance companies. You can also contact your auto insurance provider and see if you can bundle your car and homeowners insurance.
Homeowners insurance protects the dwelling, your belongings, and offers liability coverage for injuries that happen on your property. If the mailman slips and falls on your sidewalk, the dog bites a guest, a tree falls on your roof, or the neighbor’s kid injures himself doing a cannonball in your swimming pool, homeowners insurance can protect you.
If you live in a condo/co-op, the condo association’s master policy covers the building and common areas, but condo insurance covers your unit.
Unlike car insurance, homeowners insurance is not required by state law. However, if you have a mortgage, your lender will require homeowners insurance to protect the investment. Additionally, if you have a condo, your condo association may have requirements for homeowners insurance.
Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.