Understanding how typical condominium unit insurance policies work is essential to being able to choose the best one to meet your needs.
If you are shopping for a new condo, it is a good idea to look into the master policy of the HOA of the building that is already in place before settling on which condo to purchase. While a typical condo insurance plan will be able to cover the majority of your personal possessions for the most common types of disasters, pay special attention to any explicitly excluded items or situations that may be excluded from the insurance policy you are considering. Along the same lines, make sure the coverage limit you opt for is high enough to cover the repair or replacement of all of your personal belongings in the case of a devastating disaster. Keep reading to learn more about how most condominium unit insurance policies work, what they cover and what you should think about before settling on a new plan.
Condo owner’s insurance policies can be seen as a sort of midway point in cost and coverage between most renter’s insurance plans and homeowner’s insurance plans. Although renter’s insurance and condominium owner’s insurance policies have many similarities, they are two very different policies. Both policies provide personal property and liability coverages, but a condominium owner’s policy is a little more complex in the coverage that it provides.
The most obvious difference between them is that a renter’s policy does not offer any coverage for the building or structure in which the policyholder lives, while a condominium owner’s policy provides coverage for the interior structure of the owned unit. In essence, it covers the property that the policyholder owns, which in the case of condominiums is all of their personal possessions in addition to the interior of the physical home structure. The HOA of condominiums generally has an all-encompassing master policy that protects the overall physical structure of the building and that sets the organizational regulations for managing individual condo insurance policies per unit.
In most condominiums, a condo owner is responsible for insuring his or her inner walls or partitions, including paint or wall coverings, trim, fixtures, flooring and all personal property held therein. Most condo unit insurance plans include loss assessment coverage, as well, which helps the HOA divvy up necessary deductible or other out-of-pockets costs for multiple condo owners when several units have been structurally damaged due to the same disaster.
Another extra feature that you may add to your condo insurance policy if it is not already a part of the master policy is water back-up protection. General flooding is usually not covered by basic condo insurance plans, so getting water back-up protection may be the only way to safeguard your personal property if a nearby condo unit were to have a plumbing disaster or something similar that flooded your home.
While each condo owner is encouraged and sometimes required to purchase insurance coverage for the personal items and property that they own, the group that manages the building as a whole is usually required to have some form of owner’s insurance plan to oversee the overall structure and communal areas of the building. Referred to as the HOA master plan, this policy usually offers coverage for a building’s gym, pool, club house and business lounge in addition to the walls and building structures that are not individually covered by condo owner plans. The master insurance policy is also the document that clarifies exactly what property is owned by every condo owner, generally in one of two ways.
Bare walls master insurance policies are the most basic, providing coverage for the building structure but nothing inside of the condo itself, like the flooring, ceiling or any large appliances. Single entity master insurance policies, on the other hand, offer condo owners more comprehensive protection against damage or loss. Most single entity plans provide condo owners with coverage for the structure of the building in addition to important elements found inside the condo itself like the flooring, electrical system, plumbing, large appliances and more. As a more comprehensive option, these plans often have higher premiums than bare walls master insurance policies. Not all types of condo insurance plans can be used to meet the requirements of every HOA master insurance plan. It is extremely important that your review what coverage is already offered by your condo’s HOA and what sort of policy is required to meet HOA regulations.
Like in renter’s and homeowner’s insurance plans, condo insurance policies can include a few different types of coverage in addition to the basic protection offered for the policyholder’s personal possessions. One of the most important differentiations in condo insurance policy types is between policies that offer coverage for named perils and coverage for all perils. As these titles suggest, insurance plans offering protection for named perils is more limited than insurance for all perils and generally available at a lower price. Try to purchase a policy with coverage for all perils whenever possible to make sure you are protected in as many different types of situations as possible.
Within each condo insurance policy, covered personal property generally refers to all of your personal possessions that are not explicitly excluded or protected by another policy. The entire policy will have a coverage limit, of course, along with some categories of items. For example, you may only be able to receive a total of 10% of your total coverage limit in reimbursement for damage or loss specifically to your electronics like computers, televisions and gaming systems. If you have any specifically high cost possessions, these items should be added as a scheduled rider to receive guaranteed coverage in an insured disaster and so that this single item does not monopolize your entire coverage amount. Make sure to buy enough coverage to replace at least three-quarters of all of your personal possessions including your wardrobe, electronics, jewelry, etc. if a disaster were to wipe out your entire home.
Many condo insurance plans also include some coverage for personal liability issues. These funds are dedicated to dealing with legal fees if you were ever to be sued by someone who was accidently hurt on your property or by your personal possessions. Most liability coverage add-on options include hundreds of thousands of dollars in aid for covered situations for a comparatively small increase in your total insurance premium.
Another option available with many condominium unit insurance plans is no-fault medical coverage. This coverage, rarely exceeding $10,000 in total, usually accompanies personal liability coverage and will pay for the medical bills of someone accidentally hurt on your property. More commonly added to condo insurance plans is loss of use coverage. This feature can save you thousands of dollars if your condo is ever made temporarily unlivable for any insured reason. With this coverage, you can usually receive help making living expenses for up to a certain time limit or dollar amount while your condo is made livable again or you can secure another form of permanent housing.
For those people buying units in condominiums with very rigid Homeowners Associations, you may have to choose a condo owner’s insurance policy that falls under the HOA’s master policy, giving you very few options for personalizing your coverage. Most condo owners have a certain degree of freedom to choose their policy, however. When you need to shop around for the best insurance policy for your new condo, it is a good idea to get an idea of what the typical insurance plan in your area costs and covers. Be aware of any issues that may be unique to your area that could be driving up the price of the insurance premiums or that could require you to invest in additional coverage to be protected. Before making the final purchase, once again review the HOA master policy to make sure you are meeting all necessary minimums coverage standards.