Condo insurance, or HO-6, is an insurance policy meant to protect your unit and belongings, as well as help with costs associated with repairs, living costs in case the condo becomes uninhabitable, as well as personal liability costs. Although condo insurance isn’t mandatory in most buildings, it’s good to know what it does and doesn’t cover, and how it differs from the HOA master insurance policy.
What Is Covered by Condo Insurance?
The condo insurance can be broken down into five areas of coverage:
The walls, floor, tiles, and other permanent fixtures, as well as upgrades within the interior of your unit, will be included in the coverage.
This includes items such as furniture, home appliances, and electronics, as well as other movable goods within your unit. The most common perils that are named within the policy are fire, lightning, and theft.
Loss of Use
This will cover any expenses associated with the inability to live in your condo due to repairs, or building work. For example, if your unit is damaged by a fire in the building and it becomes uninhabitable as a result, you will be reimbursed for any living expenses while you are temporarily displaced from your condo, and have to stay in a hotel. In some cases, you can also be reimbursed for loss of rental income, such as when your tenants have abandoned the property.
This covers legal expenses from claims or lawsuits against you. For example, if someone is accidentally injured on your property, and wants to claim compensation for personal injury, the condo liability coverage will help you pay the medical expenses that could result from a court order, as well as the legal fees in some cases. However, if the court deems that you are the one responsible for the injury that took place in your condo, then you will need to pay those fees yourself.
Also called ‘special assessment coverage’, this is an optional coverage that covers situations in which the unit owners in a condominium are financially responsible for a shared loss. For example, if a fire breaks out in a common area, such as the lobby or the elevator, and it costs the association more than they have set aside, loss assessment coverage will pay for the share that you must contribute to make up the difference.
What Isn’t Covered by Condo Insurance?
Condo insurance doesn’t cover damage caused by natural hazards such as floods, earthquakes, or sinkholes. With floods, in particular, you may need to reach out to the National Flood Insurance Program to discuss issuing a policy, especially if you live in an area that is prone to flooding. Condo insurance will not cover you in case your unit has been damaged or broken into if it was left vacant for 30 consecutive days, or more. If you think it’s likely your condo will be left unoccupied for extended periods of time, you might want to look into obtaining vacant condo insurance.
While some condo insurance can provide coverage for loss of rental income, this isn’t always the norm. Therefore, it might be worth getting landlord insurance or encourage your tenants to get their own renters’ insurance policy.
What Does the Condo Association or HOA Master Insurance Policy Cover?
Although condo insurance is not mandatory, it’s good to bear in mind that Condo Associations or Homeowner Associations must have insurance, to cover themselves from any risks related to property maintenance and any liability concerns. So even if you don’t opt for condo insurance, you will need to share the costs of the HOA master insurance policy with the other unit owners. This policy covers the exterior of the building, the land the building is on, and the common areas, such as basements, elevators, and walkways. It applies to both repairs as well as upgrades. However, this type of policy does not cover the interior of the units themselves. Your property and the building are protected from damage caused by snow and ice, explosions, vandalism, damage caused by burst water mains, falling trees, and so on.
The type of master insurance policy varies, and the costs will differ accordingly. Therefore, it’s best to discuss with your condo association or HOA and see which policy they have in place and whether you will also be required to obtain individual condo insurance. Additionally, you can also discuss your options with an insurance broker, in order to better determine the type of plan that would best protect you and your belongings.