Is a Townhouse a Condo for Insurance?

Many property owners are confused about whether a townhouse is considered a condo for insurance purposes. While these housing types may appear similar, their underlying ownership structures dictate distinct insurance requirements. Understanding these differences is essential for securing appropriate coverage and avoiding potential gaps. The legal definitions of each property type directly influence an individual owner’s insurance responsibilities, contrasting with what a homeowners’ association (HOA) might cover.

Understanding Property Ownership Structures

The legal structure of property ownership forms the basis for insurance distinctions between townhouses and condos. A townhouse owner holds fee simple ownership, owning the land beneath their unit and the entire structure, including exterior walls and roof. This ownership model is similar to that of a single-family home. Shared walls in townhouses are governed by party wall agreements, outlining responsibilities between adjacent property owners.

Conversely, condo owners possess only the interior of their unit, defined as “from the walls in.” The land, building exterior, roof, and all common areas are collectively owned by the condominium association or HOA. This collective ownership means the HOA is responsible for maintaining and insuring these shared elements. A condo unit represents ownership of an individual space within a larger, collectively owned complex.

How Townhouse Insurance Works

Insurance for a townhouse owner resembles a standard homeowner’s policy, such as an HO-3 or HO-5. This policy type provides comprehensive coverage for the dwelling, including the entire structure of the townhouse, its exterior, roof, and foundation. Dwelling coverage also extends to attached structures like garages or porches, and built-in fixtures. This means the owner is responsible for repairing or rebuilding their entire unit in the event of a covered loss.

Beyond the structure, townhouse insurance also covers personal property within the home, protecting belongings from perils like fire, theft, or storms. Liability coverage is another standard component, offering financial protection if someone is injured on the property or if the owner accidentally causes damage to another’s property. Additionally, policies include coverage for additional living expenses, paying for temporary housing and other costs if the townhouse becomes uninhabitable due to a covered event. While townhouses may be part of an HOA, their individual insurance covers the structural elements of the unit.

How Condo Insurance Works

Condo insurance is different from a standard homeowner’s policy, typically an HO-6 policy. It complements the condominium association’s master insurance policy. An HO-6 policy covers the interior of the unit, including fixtures, appliances, and any improvements made by the owner. It also covers personal belongings and liability protection for incidents occurring within the unit.

The HOA’s master policy is a key part of condo insurance. This master policy covers the building’s exterior, common areas like lobbies and swimming pools, and sometimes structural elements of individual units. There are three types of master policies:

Bare Walls-In Policy

A “bare walls-in” policy offers the least coverage, protecting only the building’s exterior and shared spaces, leaving the unit owner responsible for everything inside their unit, including walls and fixtures.

Single Entity Coverage

“Single entity” coverage includes the building structure and original built-in property within units, like certain fixtures, but not owner upgrades.

All-In Coverage

The most extensive, “all-in” coverage, protects the building, common areas, and all permanent fixtures, including improvements and upgrades within individual units. The type of master policy directly influences the extent of coverage an individual HO-6 policy needs to provide.

Key Distinctions in Coverage

The primary difference in insurance coverage between townhouses and condos stems from who is responsible for the building’s structure. A townhouse owner’s policy covers the entire physical structure of their unit, from the foundation to the roof, similar to a detached home. The individual owner is responsible for damage to their unit’s exterior walls, roof, and foundation.

In contrast, a condo owner’s HO-6 policy covers the interior of their unit and personal belongings. Structural coverage for the exterior, roof, and common areas of a condominium building falls under the HOA’s master insurance policy. This division of responsibility means condo owners rely on the master policy for structural damage, whereas townhouse owners depend on their individual policy.

Loss assessment coverage is unique to condo insurance. This coverage protects condo owners if the HOA levies a special assessment to cover damages or liability claims that exceed the master policy’s limits or are not covered by it. For example, if a large storm causes extensive damage to common areas and the master policy’s payout is insufficient, individual condo owners might be assessed a portion of the remaining repair costs, which loss assessment coverage can help pay. Townhouse owners do not face loss assessments, as their individual policies cover their entire structure. While both property types can involve shared community aspects, their insurance requirements differ due to the distinct ownership models of the land and building structures.