What Is an HO-6 Insurance Policy for Condos?

An HO-6 insurance policy is a specialized form of homeowners insurance for condominium or cooperative apartment owners. Unlike traditional homeowners insurance covering an entire house, an HO-6 policy addresses the unique needs of unit owners within a larger building. Its primary purpose is to provide coverage for the interior of the individual unit, personal belongings, and personal liability, filling the gaps left by the master insurance policy maintained by the condominium or co-op association.

Understanding HO-6 Coverage

An HO-6 policy covers the interior structural elements of a condominium unit. This includes fixtures and improvements made within the unit, such as flooring, cabinetry, and built-in appliances, which are typically not covered by the master association policy.

The policy also protects the unit owner’s personal property, including furniture, electronics, clothing, and other movable possessions. Beyond property protection, an HO-6 policy includes personal liability coverage. This provision protects the unit owner against claims for bodily injury or property damage to others that occur within their unit or in common areas. For example, if a guest is injured inside the condominium unit due to the owner’s negligence, the liability coverage can help cover legal expenses and potential settlement costs.

The HO-6 policy complements the master insurance policy held by the condominium or cooperative association. While the association’s master policy covers the building’s exterior, common areas, and structural components, the HO-6 policy ensures that the unit owner’s personal space and belongings receive adequate protection. It effectively bridges the insurance gap between the communal ownership aspects and the individual unit ownership.

Navigating the Master Policy Relationship

Understanding the condominium or co-op association’s master policy is important for determining the scope of an HO-6 policy. Master policies vary significantly and dictate what structural elements within an individual unit are covered by the association versus what falls to the unit owner.

One common type is the “bare walls-in” policy, which typically covers the building’s exterior, common areas, and the basic structure of the individual unit up to the unfinished walls, floor, and ceiling. Under this policy type, the unit owner is responsible for insuring everything from the paint on the walls inward, including fixtures, flooring, and improvements.

Another master policy structure is the “single entity” policy, sometimes referred to as “original specifications.” This type of policy covers the building’s structure, common areas, and the individual units as they were originally built or specified by the developer. It includes standard fixtures, appliances, and finishes. If the unit owner makes upgrades or alterations beyond the original specifications, those improvements would typically fall under the unit owner’s HO-6 policy.

The most comprehensive master policy is often called “all-in” or “all-inclusive,” which covers the entire building, common areas, and even improvements and additions within individual units. While this type of master policy offers broader coverage, an HO-6 policy is still necessary for personal belongings and personal liability. The specific type of master policy directly influences the amount of dwelling coverage a unit owner needs to purchase through their HO-6 policy. Unit owners should review their association’s bylaws and master policy declarations to understand the exact division of insurance responsibilities.

Key HO-6 Coverage Components

Personal Property Coverage

Personal property coverage protects the unit owner’s movable possessions inside the condominium unit. This includes items such as furniture, electronics, clothing, and other personal effects. When a claim is made, the payout can be based on either actual cash value (ACV) or replacement cost value (RCV). Actual cash value accounts for depreciation, meaning the payout reflects the item’s depreciated worth at the time of loss, while replacement cost value provides the amount needed to replace the item with a new one of similar kind and quality, without deduction for depreciation.

Loss Assessment Coverage

Loss assessment coverage protects condominium owners from a unique risk associated with shared property ownership. This coverage protects the unit owner if the homeowners association (HOA) levies a special assessment against all unit owners for a covered loss that exceeds the master policy’s limits or for a large deductible. For instance, if a hurricane causes extensive damage to the building’s roof, and the master policy’s coverage limit is insufficient, the HOA might assess each unit owner for their share of the remaining repair costs, which this coverage would then help to cover.

Personal Liability Coverage

Personal liability coverage provides financial protection against lawsuits arising from bodily injury or property damage to others for which the unit owner is legally responsible. This coverage extends to incidents occurring within the unit, such as a visitor slipping and falling, or even in common areas if the unit owner’s actions contribute to the damage or injury. The policy typically covers legal defense costs, court awards, and settlement amounts up to the policy limits.

Loss of Use Coverage

Loss of use coverage, also known as additional living expenses (ALE), provides financial assistance if the condominium unit becomes uninhabitable due to a covered loss. This coverage helps pay for temporary housing, food, and other necessary living expenses incurred while the unit is being repaired or rebuilt. For example, if a fire forces the unit owner to vacate their home, this coverage would help cover hotel stays and meal costs during the displacement.

Building Additions and Alterations Coverage

Building additions and alterations coverage, also known as dwelling coverage, specifically covers improvements made to the unit by the owner. This includes upgrades like new flooring, custom cabinetry, or enhanced fixtures that were not part of the original construction and are not covered by the master policy. This component is important, especially when the master policy is a “bare walls-in” type, as it ensures the owner’s investment in their unit’s interior finishes is protected against covered perils.