What Does Condo Insurance Typically Cover?

Condo insurance, or an HO-6 policy, is specialized coverage for condominium or cooperative unit owners. It protects the unit owner’s personal property and provides liability coverage for incidents within their unit. It complements the homeowners association’s (HOA) master insurance policy, which covers the building’s exterior and common areas. An HO-6 policy ensures that a unit owner has financial protection where the master policy does not extend.

Components of a Condo Insurance Policy

A standard HO-6 policy includes several key coverages. These components provide comprehensive coverage for the unit’s interior and the owner’s personal financial risks.

Dwelling coverage, often referred to as Coverage A, protects the interior structure of the condominium unit. This includes elements from the “walls-in,” such as the drywall, flooring, built-in appliances, cabinets, and any improvements or upgrades made by the owner. This coverage addresses damages to interior structural components not covered by the HOA’s master policy. For instance, if a fire damages the interior walls or built-in shelving, dwelling coverage would respond.

Personal property coverage, or Coverage C, safeguards the owner’s personal belongings within the unit. This encompasses a wide range of items, including furniture, electronics, clothing, and jewelry, regardless of where they are located. Policyholders can choose between actual cash value (ACV) coverage, which accounts for depreciation, or replacement cost value (RCV) coverage, which pays for replacement without deducting for depreciation. Replacement cost coverage provides a more complete recovery for a covered loss.

Loss of use coverage, also known as additional living expenses (ALE) or Coverage D, provides financial assistance if the unit becomes uninhabitable due to a covered peril. This coverage helps pay for temporary housing, such as hotel stays, as well as increased costs for food and laundry that exceed normal living expenses. For example, if a burst pipe makes your condo unlivable for several weeks, this coverage would help with the hotel bills and dining costs.

Personal liability coverage, or Coverage E, offers financial protection if the policyholder is found legally responsible for bodily injury to others or damage to their property. This can occur either within the unit or elsewhere. This coverage also extends to cover legal defense costs if the policyholder is sued. Liability limits often start around $100,000 but can be increased to $500,000 or more, providing protection against potential lawsuits.

Medical payments to others, designated as Coverage F, covers minor medical expenses for guests who are injured on the policyholder’s property, regardless of who was at fault. This coverage is for smaller incidents and can help prevent a minor injury from escalating into a liability claim. It provides a way to address immediate medical needs without requiring a determination of fault.

Your Policy Versus the HOA Master Policy

Understanding the distinct roles of your individual HO-6 policy and the homeowners association’s (HOA) master policy is important. The HOA master policy covers the building’s structure, common areas, and shared amenities like lobbies, roofs, and pools. However, the extent of coverage for the individual units varies significantly depending on the type of master policy the HOA holds.

One type is the “bare walls-in” (or “studs-in”) master policy. Under this policy, the HOA’s coverage extends only to the basic building structure and common elements. The unit owner is responsible for insuring everything from the bare walls inward, including interior fixtures, cabinetry, flooring, wiring, and plumbing. This type of master policy requires the unit owner to purchase a more extensive HO-6 policy to cover these interior components.

Another type is the “single entity” (or “original specifications”) master policy. This master policy covers the building structure, common areas, and the original fixtures and appliances within the units as they were first built. For example, it would cover the original countertops or bathroom fixtures. However, any upgrades or improvements made by the unit owner, such as new hardwood floors replacing original carpeting, are not covered by this master policy. The unit owner’s HO-6 policy must then cover personal belongings and these specific upgrades.

The most comprehensive type is the “all-in” (or “all-inclusive”) master policy. This policy covers the building structure, common areas, and most fixtures and improvements within the unit, including upgrades made by owners. In such cases, the unit owner’s HO-6 policy primarily focuses on protecting personal property and providing liability coverage, as much of the interior structure and fixtures are covered by the master policy. This reduces the amount of dwelling coverage needed on the individual HO-6 policy.

Unit owners should review their HOA’s Covenants, Conditions, and Restrictions (CC&Rs) or bylaws. These documents specify the type of master policy in place and delineate the responsibilities of the HOA versus the individual unit owner regarding insurance coverage. Understanding these distinctions helps avoid potential gaps in coverage and ensures all parts of the unit and its contents are adequately protected.

Common Exclusions and Endorsements

Standard HO-6 condo insurance policies do not cover every possible peril, and unit owners should be aware of these limitations. Certain events are excluded from coverage, meaning that damage resulting from these events would not be paid for by a basic policy. For example, damage caused by floods is almost universally excluded and requires a separate flood insurance policy, often obtained through the National Flood Insurance Program (NFIP).

Earthquake damage is another common exclusion. Unit owners in seismically active regions may need to purchase a specific earthquake endorsement or a separate policy to cover losses from earth movement. Damage from sewer backup or sump pump overflow is not covered by a standard HO-6 policy. These types of water damage often require a specific endorsement to be added to the policy for coverage.

Policies also exclude damage resulting from neglect, poor maintenance, or pest infestations. Insurers expect unit owners to perform routine upkeep on their property to prevent such issues. Losses due to wear and tear over time are also not covered, as these are considered normal deterioration rather than sudden, accidental damage.

To address these common exclusions and enhance coverage, unit owners can consider various endorsements or add-ons. A scheduled personal property endorsement is valuable for high-value items such as jewelry, fine art, or collectibles. This endorsement allows specific items to be insured for their appraised value, providing broader coverage than standard personal property limits.

Identity theft coverage is another popular endorsement that can help unit owners recover from the financial impact of identity fraud. Some policies also offer increased limits for certain categories of personal property, such as business property used at home, which may have lower default coverage limits. Additionally, obtaining a water backup and sump pump overflow endorsement can provide coverage for water damage originating from drains or sumps, filling a common gap in standard policies. These endorsements allow unit owners to tailor their HO-6 policy to their specific needs and risks.