What Does Condominium Insurance Cover?

Condominium ownership presents a unique insurance landscape, differing significantly from that of a single-family home. This is due to the shared ownership structure in condo communities, where individual units exist within a larger complex. Condo insurance involves two layers of protection: one from the homeowners’ association (HOA) covering shared elements, and another purchased by the individual unit owner.

The Master Condo Association Policy

The condominium association (HOA) secures a master insurance policy to cover the common elements and shared property of the complex. This policy safeguards the building’s exterior, including the roof and outer walls, along with common areas such as lobbies, hallways, shared amenities, and structural components. The scope of this master policy directly influences the coverage needed by individual unit owners.

There are three types of master policies, each defining the boundary between the association’s and the unit owner’s responsibility:

Bare Walls-In: This most limited policy covers the building structure and common areas but excludes anything inside individual units, such as fixtures, appliances, and interior finishes. The unit owner is responsible for insuring the entire interior of their unit.
Single Entity: This policy offers broader coverage, encompassing original fixtures and appliances within individual units. It covers initial installations like kitchen cabinets and bathroom fixtures but does not extend to improvements or alterations made by the unit owner. Owners must insure any upgrades or renovations.
All-In: The most comprehensive policy, it covers the building’s structure, common areas, and all permanent fixtures and improvements within individual units, even those installed by current or previous owners. With an “all-in” policy, the unit owner’s responsibility for structural coverage is minimized, largely focusing on personal belongings and liability.

The cost of this master policy is shared among all unit owners through recurring HOA fees.

Your Individual Condo Unit Policy (HO-6)

An individual condo unit policy, known as an HO-6 policy, covers aspects of a condominium that the master association policy does not, or only partially, cover. It protects a unit owner’s interests within their private space and their personal financial liabilities. This policy complements the master policy, filling potential coverage gaps. An HO-6 policy is often required by mortgage lenders and condo associations.

Dwelling or Unit Coverage

Dwelling or unit coverage within an HO-6 policy protects the interior of the individual condo unit. This includes elements like interior walls, flooring, ceilings, built-in cabinets, and fixtures, starting where the master policy’s coverage ends. For example, if the master policy is “bare walls-in,” the HO-6 dwelling coverage protects everything from the paint on the walls to installed appliances. This coverage is for repairs or replacements due to covered perils such as fire, smoke, wind, or vandalism.

Personal Property Coverage

Personal property coverage safeguards the owner’s belongings against covered losses. This includes items such as furniture, electronics, clothing, and other household goods. Coverage extends to personal property whether it is inside the condo unit or temporarily located elsewhere, such as in a storage unit or while traveling. If a covered event like theft or fire occurs, this coverage helps repair or replace damaged or stolen items.

Personal Liability Coverage

Personal liability coverage provides financial protection if the unit owner is found legally responsible for bodily injury or property damage to others. This can include situations where a guest is injured within the condo unit or if the owner accidentally causes damage to another unit or a common area. The policy helps cover legal defense fees, medical expenses, and potential settlement costs up to its limits. This coverage extends beyond the unit’s physical boundaries, protecting the owner from various liability claims.

Loss of Use Coverage

Loss of use coverage, also known as additional living expenses, assists the unit owner if their condo becomes uninhabitable due to a covered loss. This coverage helps pay for temporary housing, such as hotel stays, and other increased living costs like meals and laundry, while the unit is being repaired or rebuilt.

Tailoring Your Condo Insurance Coverage

Customizing an HO-6 policy requires understanding the condominium association’s master policy and governing documents. Reviewing the HOA’s bylaws and declarations is a crucial step. These documents outline the type of master policy in place—bare walls-in, single entity, or all-in—which dictates the dwelling coverage needed for the individual unit’s interior. For example, if the master policy is “bare walls-in,” the HO-6 dwelling coverage must be more extensive to cover interior finishes and fixtures.

Accurately assessing personal property value is another important aspect. Creating a detailed home inventory, with photographs or receipts, helps determine the appropriate personal property coverage. This inventory should list belongings and their estimated replacement cost to ensure adequate funds are available after a covered loss. While standard HO-6 policies include personal property coverage, valuable items like jewelry, fine art, or collectibles may have sub-limits, necessitating additional coverage.

Endorsements, or additional coverages, can be added to an HO-6 policy to enhance protection for particular risks.

Loss Assessment Coverage

Loss assessment coverage is a common add-on, providing funds if the HOA levies a special assessment on unit owners. This can occur if the master policy’s limits are exceeded for a covered loss in common areas, or if a large deductible on the master policy is passed on to unit owners. This coverage helps prevent significant out-of-pocket expenses for shared damages.

Water Backup and Sump Overflow Coverage

Water backup and sump overflow coverage is a valuable endorsement, as standard policies often exclude damage from sewer or drain backups and sump pump failures. This addition protects against water damage to the unit and personal property caused by such events, which can be costly to repair.

Identity Theft Protection

Identity theft protection can also be added, providing financial reimbursement for expenses incurred while restoring one’s identity after a theft. This coverage helps with legal fees, lost wages, and other costs associated with identity recovery.

Scheduled Personal Property Endorsement

For valuable items exceeding standard personal property limits, such as expensive jewelry, artwork, or collections, a scheduled personal property endorsement can provide specific coverage. This allows individual items to be listed and insured for their appraised value, often with broader coverage for more perils and without a deductible.

By carefully evaluating the master policy, personal assets, and potential risks, unit owners can build a comprehensive HO-6 policy that provides robust financial protection.