What Is an HO-6 Policy and What Does It Cover?

An HO-6 policy is a specialized form of homeowners insurance for condominium or cooperative unit owners. Unlike traditional homeowners insurance, an HO-6 policy protects the interior of a condo unit and the owner’s personal possessions. It complements the master insurance policy held by the condominium or homeowners association (HOA), which typically covers the building’s exterior and common areas. An HO-6 policy fills coverage gaps left by the master policy, safeguarding the unit owner’s interests by providing financial protection for the unit’s interior structure, personal belongings, and liability.

Core Coverages of an HO-6 Policy

An HO-6 policy includes several types of coverage designed to protect a condo owner’s interests within their unit.

Dwelling coverage, often called “walls-in” or “studs-in” coverage, protects the interior structure of the condo unit. This includes elements from the bare walls inward, such as fixtures, improvements, alterations, flooring, cabinetry, built-in appliances, and interior walls.

Personal property coverage safeguards the unit owner’s belongings against specified perils like fire, theft, or vandalism. This includes furniture, electronics, clothing, and other personal items inside the unit. Coverage often extends to personal property temporarily away from the unit. Policyholders can choose between actual cash value (depreciation applied) or replacement cost (new items without depreciation) for their personal property.

Loss of use coverage, also known as additional living expenses (ALE), provides financial assistance if the condo unit becomes uninhabitable due to a covered loss. This coverage helps with increased living expenses, such as temporary housing, meals, and other necessary costs incurred while the unit is being repaired or rebuilt.

Personal liability coverage protects the unit owner if they are found legally responsible for bodily injury or property damage to others. This protection extends to incidents occurring within their unit or elsewhere, covering legal expenses and judgments. Medical payments to others covers medical expenses for guests who sustain minor injuries on the owner’s property, regardless of fault. This coverage can help prevent larger liability claims.

Understanding the Relationship with Master Policies

The unique structure of condo ownership requires understanding how an HO-6 policy interacts with the homeowners association’s (HOA’s) master insurance policy. The master policy, purchased by the HOA, covers the building’s exterior, common areas, and shared facilities like lobbies, hallways, roofs, and elevators. The extent of its coverage for individual unit interiors varies, directly impacting the necessary scope of an HO-6 policy.

Bare Walls-In Master Policy

A “bare walls-in” or “studs-in” master policy provides limited coverage for unit interiors, typically covering only the building’s basic structure up to the drywall. This includes framing, wiring, and plumbing. Under such a policy, the unit owner is responsible for insuring everything from the drywall inward, including flooring, cabinets, fixtures, and any improvements. A robust HO-6 policy is crucial here to cover the interior dwelling.

Single Entity Master Policy

A “single entity” or “original specifications” master policy expands on bare walls-in coverage by including the original fixtures and standard finishes within each unit, as initially installed by the builder. This might cover standard cabinets or basic flooring. Unit owners remain responsible for insuring any upgrades, alterations, or improvements they make beyond these original specifications.

All-In Master Policy

The most comprehensive type is an “all-in” or “all-inclusive” master policy. This policy offers extensive coverage, often including common areas, the building’s exterior, and everything within the units, even improvements and fixtures. Despite this broad coverage, an HO-6 policy remains essential for the individual unit owner. It still covers personal property, personal liability, and can help cover the unit owner’s portion of the master policy’s deductible if a covered loss affects multiple units or common areas. Thus, the HO-6 policy ensures comprehensive protection for the condo owner.

Customizing Your HO-6 Coverage

Tailoring an HO-6 policy to individual needs involves understanding various options that adjust coverage and cost.

Deductibles

The deductible is the amount a policyholder pays out-of-pocket before insurance coverage begins for a claim. Choosing a higher deductible typically lowers the insurance premium, while a lower deductible results in higher premiums but less out-of-pocket expense during a claim. Unit owners can select a deductible amount that aligns with their financial comfort and risk tolerance, commonly ranging from $500 to $2,500.

Endorsements

Policyholders can customize their HO-6 coverage through endorsements, also known as riders or add-ons. These additional coverages extend protection beyond the standard perils in the base policy.

Water Backup and Sump Pump Overflow: Covers damage from water backing up through sewers or drains, which standard policies often exclude.
Identity Theft Protection: Provides coverage for expenses related to identity restoration following a theft.
Scheduled Personal Property: Allows unit owners to insure specific high-value items like jewelry, art, or collectibles for their appraised value, exceeding standard personal property limits.
Ordinance or Law Coverage: Covers additional costs to bring a damaged unit up to current building codes during repairs, especially relevant for older buildings where codes frequently update.

Assessing Coverage Needs

Assessing appropriate coverage needs involves evaluating personal assets and potential risks. Creating a detailed inventory of personal belongings helps determine adequate personal property limits. Unit owners should also consider the value of any improvements or upgrades made to their unit since purchase, as these additions require sufficient dwelling coverage. Liability limits should be chosen based on personal assets that could be at risk in a lawsuit, with many insurers offering limits from $100,000 to $500,000. Higher limits are available through an umbrella policy.