If you're looking to purchase or have just moved into a condo, you're probably wondering how to properly insure your condo unit. As a condo unit owner, you'll always have to factor in your condo association. It's no different when it comes to insurance for a condo unit. You'll have to worry about two policies: yours and the condo association's master policy. A condo association's insurance policy typically covers the exterior structures of the building, common areas or property, and the association's liability. On the other hand, your condo owner's insurance policy will cover your liability and possessions, as well as the interior of your unit. There are cases where it's not always clear whose responsibility it is to cover certain damages interior losses can occur if, for example, plumbing or electrical fails. Read on to learn how to best mitigate your risks.
Understanding the Master Policy
Your first step should always be to go over your condo association's policy to discover what is (and isn't) covered. That way, you'll know what you should cover in your personal insurance plan, and for how much. Hopefully, the documents provided by your condo association will state in clear language the responsibilities of the owner and association, respectively. Don't be afraid to ask questions to get clarification. In general, master policies fall somewhere between all-in or bare walls-in. All-in insurance for a condo unit will cover things originally built into the unit (usually any changes made to the unit will not be covered under the association policy), such as interior walls, wiring, plumbing, fixtures, and cabinetry. Bare walls-in policies will not cover the aforementioned items; everything within the unit is the responsibility of the owner.
Estimating Costs for Damages
When looking into your condo association's master policy, don't forget to check the deductible. A higher deductible will result in lower premiums and likely lower condo fees but will cost more when a loss does occur. Your condo insurance, or HO-6 policy, should be able to pay for losses within the deductible amount. To calculate how best to ensure your condo unit, you should estimate how much it would cost to fix or replace your personal belongings, fixtures, and any changes or improvements you've made to your unit. Consider the financial impact of water or fire damage throughout your unit, or of having your most valuable items stolen. In the event of a major loss, you'll want your condo unit insurance to pay to replace all or the majority of your lost or damaged items.
Choosing Your Coverage
Now we'll talk about how to choose insurance for a condo unit. Typical HO-6 policies include coverage for your personal belongings, personal liability, and additional living expenses should your unit become uninhabitable. Depending on the value of your items and where you live, you may want to purchase additional coverage. Check what counts as a covered peril under standard policies; often water damage from floods or sewer backups isn't included. In some cases, earthquakes, high winds, or other special perils may not come in a basic plan. If you're at risk for any of these perils, it may be worth paying extra to add them to your policy. You can also get special coverage for high-value items, as well as replacement cost coverage. Finally, loss assessment coverage works for you in cases where a claim exceeds the master policy's limits.