It’s nice living the condo life.
You don’t have to worry about mowing your lawn. Plowing your driveway is someone else’s problem. And if something needs to be repaired, the HOA has it covered!
Right?
Well, kind of.
If you’re enjoying the good life in a condo, then you’re also paying into a Home Owner Association (HOA). There are a lot of perks to being part of an HOA, but there are some things it won’t cover.
This guide will help you with the ins and outs of buying condo insurance including how much you need and what exactly it covers.
1. Condo Life: Where Your HOA Ends
One of the nice things about owning a condo is that your HOA will protect a large part of your property. However, it won’t cover everything. That’s why condo insurance is a must.
Your condo’s HOA won’t cover the cost of replacing your personal items inside of your home. Plus, it might not even cover all of the possible damage outside of your unit.
Condo insurance that includes coverage like loss assessment from reputable agencies such as Morison Insurance Brokers Inc. is a must. To get started, just continue reading.
2. Get the Right Condo Insurance Coverage
Condo insurance is a bit different than home insurance. That’s because home insurance covers damage to the home and its contents. Whereas condo insurance is only going to cover the damage and liability risks for the condo owners of an individual unit.
Condo insurance, also known as HO6 insurance, is similar to home insurance in that it will cover both damages and liability claims in case someone is injured on your property. Things like fire, frozen pipes, theft, or certain weather damage will be covered.
Remember that, like home insurance, condo insurance does not cover flood damage. This must be purchased separately.
Before you purchase condo insurance, it’s a good idea to take a look at the condo’s HOA master policy. Inside it should list everything that the HOA covers in the case of an incident.
3. Find Out Your HOA Protection
It might be difficult to understand the master policy. That’s because it can be written with a lot of legal jargon that in some cases only a lawyer will understand easily.
Here are some common types of protection that an HOA will mention in their policy:
All in or All Inclusive
This term is referring to the exterior and interior of the condos. Meaning your HOA will cover damages to the outside of your place as well as things inside your condo like fixtures and installations. It’s great to have this coverage for your place!
Keep in mind though, “All in” policies do not include your personal property. That means your HOA won’t cover things like stolen items from your home.
You still want to protect your valuables inside your condo with additional insurance. But luckily you won’t need quite as much coverage as other policies.
Special Entity
If your condo’s master policy refers to “Special Entity” coverage, then you still have a nice arrangement. Your condo’s HOA is going to cover almost all of the structure. This includes interior fixtures, but it won’t cover any additions or updates that are made.
If you’re planning to make multiple renovations, you will have to be prepared to cover them with your own insurance. You also still need to cover the cost of any damaged personal items.
Bare Walls in and Walls Stud in
This type of policy is going to cover the bare minimum, meaning the basic structure of the building. It offers the least coverage. You will have to cover the costs of any damage done to interior fixtures such as lights, countertops, and cabinets.
In addition, as with the other policies, you will also need to include your personal items when calculating your insurance coverage.
4. How to Determine Cost
When you’re ready to purchase condo insurance, you may be wondering how much it is going to cost you. It can depend on how much coverage you need. But here is a breakdown of what it can entail.
Liability Insurance
As mentioned earlier, condo insurance can cover liability issues. This is in case someone gets hurt while they are in your condo. It’s important to purchase enough insurance that will protect the cost of your assets.
Usually, liability insurance doesn’t cost that much per year. In fact, it’s probably the least costly part of your condo insurance. In some cases, for about $300,000 of liability coverage, you will have to pay about $20 a year.
Contents Insurance
No matter what type of policy that your HOA offers, they won’t cover damage to your personal property. That’s where contents insurance comes in.
Contents insurance covers your personal items. These are things like your tv, couch, or a priceless antique vase. Basically, anything that you plan on taking with you when you move.
To figure out how much contents insurance you will need, you should take an inventory of your valuables. This includes things like jewelry, electronics, artwork, etc. Try to determine what these would cost in today’s dollars. Then add them up to determine the value of all your condo’s contents.
Keep in mind, you don’t want to calculate your items based on their value if you were to sell them. You want to price them according to the cost to replace them new.
For example, your tv might have cost you $700. But if you were to have to buy a new one, it would be well over $1,000 today. You won’t regret calculating your contents insurance this way if you were to ever have to use it.
Loss Assessment Coverage
As a condo owner, you should consider having loss assessment coverage. This is going to be a benefit to you in case your HOA requires you to contribute to a large cost. This could be if an unexpected loss or liability occurs that is not covered by the HOA’s insurance policy.
Since you are part of an HOA, you are responsible for all the common areas on the property. Which means you could owe more than the expected fee if there are damages to the structure.
This could be in the form of repaving a road, fixing the roof, or if someone was injured on the property. Everyone would be expected to pay their part.
Loss assessment coverage will help you pitch in without having to pay for everything yourself. Check your HOA’s policy to determine how much their insurance covers common areas. See what special deductibles they have for each of these hazards.
5. How to Calculate Your Condo Insurance Cost
Now that you understand condo insurance and the different types of things you will need to cover, how will you determine what you need?
It’s going to take a bit of calculating to determine your specific coverage requirements. First off, you will need to see how much your HOA will cover for you. This is going to account for how much insurance you take for your individual unit.
A common recommendation is to start with $40,000 for your contents insurance and then for every additional 500 square feet add another $5,000. You may be required by your mortgage lender to cover a certain amount of money. Typically they will require you to cover 20% of your unit’s value, loan value, or appraisal value.
Liability insurance ranges from $100,000-$500,000. If your assets exceed that amount, you might want to consider an umbrella policy to cover everything.
Lastly, check how large the deductibles are for your HOA’s insurance. Depending on the plan for your association, you may need loss assessment coverage in case something happens on the property.
Believe it or not, in some cases, the deductibles are as high as $50,000. That means you could have to chip in to cover the deductible.
7. What Your Condo Insurance Won’t Cover
Even if you purchase the appropriate amount of condo insurance for your situation, you should still keep in mind some of the incidences it won’t cover.
While you will be covered for things like theft, liability, lightning, burst pipes, and fire. Your insurance won’t cover earthquakes, normal wear and tear, nuclear hazards, intentional injuries, floods, or damages from things like animals and sewer backups.
Be sure to read the fine print on your insurance policy to see exactly what will or won’t be covered so there are no surprises.
Luckily, being part of an HOA means that most repairs and maintenance needed for the outside of the structure will be covered. You won’t have to worry too much about the basic upkeep needed to keep the exterior looking good.
8. Keep Your Condo Coverage Updated
Even after you’ve calculated your condo insurance, don’t forget to revisit your calculations. This could be on a yearly basis or after a renovation. You might want to do some cost comparisons with competitor’s insurance policies.
Take a look at your assets and recalculate the costs. A lot can change in a year including inflation costs and real estate values can fluctuate. So don’t let your policy sit for too long without reviewing it.
Do You Have Condo Insurance?
If you still haven’t purchased condo insurance, then it’s time you get protected! We hope this article helps you gain the coverage you need to be safe.
Do you have condo insurance? How did you calculate your coverage? Share your thoughts and experiences in the comments below.
