Everything You Need To Know About Condo Insurance

Here’s what condo owners need to know about insuring their property—and protecting themselves.

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Over 5 million households in America live in condominiums or co-operatives (co-ops), according to the U.S. Department of Housing and Urban Development. Unlike single-family houses, condominiums are usually owner-occupied units in structures that house multiple families.

There are certain advantages to living in a condo—individual families are not required to maintain the exterior of the structure or the surrounding property, for example—but condo living also comes with some unique decisions. Insurance is one element of condo living that owners need to understand in order to fully protect themselves and their personal belongings.

When you purchase a condo, your bank will probably require you to have insurance, and most condo agreements will also require you to have it. Unlike homeowners insurance, which usually includes coverage for the physical structure of a dwelling, condo insurance doesn’t provide dwelling coverage. That’s because the entire property (or the common components of the property) is collectively held by the owners in a form of joint ownership.

What protects the structure as a whole is called a master insurance policy. It covers common areas like the basement, the gym, the elevator and the walkways, as well as the exterior of the building. The master policy is usually held by the condo association, and its cost is paid by residents in the form of maintenance fees or association dues. For protection within your residence, you’ll need to have your own individual insurance policy.

What does an individual condo insurance policy include?

Personal property coverage protects your physical belongings and any structural elements of your dwelling that are not covered by the master policy. Personal property coverage will protect you and your belongings against named perils, which may include damage from fire, smoke, theft or other disasters that are listed in your policy.

Additional living expenses coverage (sometimes called loss of use coverage) reimburses policyholders for the cost of temporarily living somewhere else if there’s a covered problem with the condo.

Personal liability coverage can help provide protection against claims resulting from injuries and/or damage to other people and property. In the case of an accidental injury in your home, it may help pay for a visitor’s medical bills, pain and suffering, lost wages, and legal costs.

What type of homeowners insurance policy is typically required on a condominium?

Condo insurance is categorized as an HO-6 policy, which is different from the standard home insurance coverage (called HO-3 insurance) that protects a single-family house. The exterior of the condo is covered by a master policy that’s chosen by the homeowners association (HOA) or condo board, but all your personal coverage will be protected by the individual HO-6 condo policy you choose.

An individual condo insurance policy will provide coverage for things such as your inside walls and cabinets as well as other interior structures, like built-in bookshelves. Problems that are usually not covered include damages from earthquakes, floods and water backup, but there are additional coverages you can buy, such as earthquake or flood insurance, to protect yourself against those situations.

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Why do you need insurance for your condo?

Your ability to repair your individual dwelling is important because it protects the overall value of the whole building. Whether you’re required to have condo insurance by your lender and your condo’s by-laws or not, getting condo insurance can be a wise decision.

Not having coverage means you’ll have to pay out of pocket for repairs to your individual unit and possessions if they’re damaged; such problems are not covered by the master condo policy.

What is the average cost of condo insurance?

Forbes reports that the average cost of condo insurance is $445 per year for $100,00 in personal property coverage. That’s less than the average cost of home insurance, which is $1,582 per year for $350,000 in dwelling coverage, because a homeowners policy provides open perils coverage for the house structure.

How do you choose the right insurer?

If you need condo insurance (or you’re thinking about changing your coverage or insurer), price may be at the top of your list of factors to consider, but there are other equally important considerations.

The financial strength of the insurance company will help you protect yourself not just today, but in the years to come as well. The Insurance Information Institute advises people to check the reviews of independent rating agencies, such as Moody’s and Standard & Poor’s, that assess insurance companies.

An insurance company’s reputation and service reflect on how well they can answer questions and handle claims fairly, efficiently and quickly. Your state insurance department can help you see if an insurance company has had many consumer complaints relative to the number of policies sold.

Your level of comfort with your insurance purchase, your agent and the insurance company will reflect things like how easy the agent or company is to reach if you have a question or need to file a claim.

Next steps: Get covered with condominium insurance.

Purchasing an insurance policy can be done through an insurance agent or a broker at a firm, over the phone or online. AAA Insurance specialists can give you a comprehensive household coverage review so you can create a plan that’s right for you. They’ll help you understand what your policy covers, review your insurance coverage options and identify discounts you qualify for with insurance through AAA.

You’ll hear about savings opportunities like disappearing deductible, claim-free rewards and discounts for bundling your home insurance with auto insurance or life insurance policies. With AAA Home & Condo Insurance, you can build a policy that fits your needs—and your budget.

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