Five Things to Know When Buying Condo Insurance
Condo insurance is designed to cover what your condo association’s master policy won’t. Here are 5 things to consider when buying insurance for your condo.
1. Find out what the Homeowner Association’s (HOA) policy covers.
As a condo owner, your HOA collects monthly dues that include insurance for the condo’s building exteriors and common areas. To find out what that insurance includes, review the association’s Bylaws, CCNR’s, or the Master Insurance Policy.
These are the most popular types of HOA master policy coverage:
- “All-in” – These policies can protect the exterior and structural interior contents of the building except for your personal property.
- “Bare walls” – This would only cover the exterior structure of the building, so you would be responsible for insuring all the interior contents in your home including appliances, personal belongings, bathroom/kitchen fixtures, flooring, etc. if there was a loss.
2. Estimate the amount you would need to repair or replace your condo’s interior structure.
After you determine which parts of the condo you are personally responsible for, you can get a better idea of how much coverage you may want. Think of this coverage for everything that is attached to your unit. Some carriers call this Dwelling Coverage, or Tenant Improvements.
Your condo insurance policy should cover all things not included in the master policy:
- If your HOA has an “all-in” policy, it generally does not include improvements you make to your unit. You would need to purchase additional insurance to cover renovations, remodeling, etc.
- If your HOA has a “bare walls” policy, determine the amount it would take to replace all your condo’s interiors. This could include lighting, flooring, cabinets, etc.
An insurance agent can assist you in reviewing your condo’s bylaws, etc. and guide you in estimating the amount of coverage you will need for your unique situation.
3. Estimate the value of your personal items.
Condo insurance can cover your personal property items too if they are ever stolen or damaged. Personal Property coverage covers everything in your condo that isn’t attached, like clothing, furniture, appliances, electronics, housewares, etc.
It’s easy to underestimate the value of your personal property so be sure to do a full home inventory to help make sure that you are not underinsured.
It’s also important to include unique or expensive items, like artwork, jewelry, collectibles, musical equipment, etc. Your condo insurance may only provide low coverage limits for these valuable items, so talk to your insurance agent about adding a “rider” to cover them the way you want.
A standard policy covers your personal belongings on an “actual cash value” basis, meaning the insurer would pay the depreciated value of older items if you ever filed a claim. Upgrading to replacement cost coverage means the payout will be enough to buy new items.
There are numerous ways to conduct a home inventory, including video, written, or pictures. Check out our post about using home inventory apps that will make the process easier.
4. Protect your assets and investments.
Condo insurance can help cover liability costs if you are sued for negligence, damaging someone else’s property, or if someone gets hurt in your unit.
Unfortunately, lawsuits are common. Consider your net worth, available assets, and your own need to cover yourself from liability issues.
Medical payments coverage generally has a lower limit and can pay the medical bills of someone hurt in your unit, regardless of fault.
It may also be helpful to consider a Personal Liability Umbrella policy, which supplements your present policies and provides additional coverage in increments of $1 million. Listen here to Anna’s money date video recording where she talks more about this important coverage.
5. Explore other coverages.
Additional Living Expenses/ Loss of Use – If there is a covered loss and you cannot live in you unit while it is being repaired, this coverage could help pay for hotel stays, rent someplace else, restaurants, etc.)
Loss assessment – If there is a covered loss and your HOA has a high deductible or the claim goes above the limits of its master policy, then the HOA may ask each unit owner to step in to cover the excess cost. Alternatively, the association could ask an individual unit owner to pay the entire deductible if the damage originated in their condo. This policy would not help with a special assessment to replace an aging roof because insurance doesn’t pay for wear and tear.
Water backup – If a clogged drain or malfunctioning sump pump sends water into your unit, the water backup endorsement pays for any resulting damage.
I hope you found this helpful. Insurance Reviews are part of our comprehensive financial planning package, and ongoing financial planning service so be sure to schedule yours with your financial advisor.