What Is an HO6 Insurance Policy & What Does It Cover?

An HO6 insurance policy, often called condo insurance, provides specialized coverage for condominium or cooperative unit owners, protecting personal belongings and the unit’s interior structure. It is distinct from the insurance held by the condominium association, which typically covers the building’s exterior and common areas. An HO6 policy offers financial protection against perils that could damage a unit or lead to liability claims.

Understanding HO6 Policies

An HO6 policy is specifically tailored for condominium and co-op owners, differing significantly from standard homeowners’ insurance, known as an HO3 policy. While an HO3 policy covers the entire structure of a single-family home, including the land it sits on, an HO6 policy focuses on the individual unit from the walls inward. Unit owners require this separate coverage because their ownership structure means they are responsible for their unit’s interior and personal property, while the homeowners association (HOA) maintains a master policy for the building’s exterior and shared spaces.

Key Coverages of an HO6 Policy

An HO6 insurance policy includes several types of coverage. These protect a condominium or co-op unit owner’s interests.

Personal Property Coverage

Personal property coverage within an HO6 policy protects a unit owner’s belongings from various perils, such as fire, theft, and vandalism. This includes furniture, electronics, clothing, and other personal effects. When determining coverage limits, unit owners typically choose between replacement cost value (RCV) and actual cash value (ACV). RCV pays to replace damaged items with new ones of similar kind and quality, while ACV accounts for depreciation, paying out a lower amount reflective of the item’s current market value.

Dwelling Coverage (Interior/Walls-In)

Dwelling coverage, often referred to as “walls-in” coverage, protects the interior structure of the condominium unit. This includes elements from the studs inward, such as interior walls, flooring, cabinetry, fixtures, and built-in appliances. This coverage is distinct from the building’s exterior structure, which is typically covered by the HOA’s master policy. If a covered event damages the unit’s interior, the owner has resources to repair or rebuild.

Loss of Use Coverage

Loss of use coverage, also known as additional living expenses (ALE), provides financial assistance if a covered loss makes the unit uninhabitable. This coverage helps pay for temporary housing, meals, and other necessary living expenses incurred while the unit is being repaired or rebuilt. For example, if a fire forces a unit owner to vacate their condo, ALE can cover hotel costs and restaurant bills during the displacement.

Personal Liability Coverage

Personal liability coverage protects the unit owner against financial losses from lawsuits for bodily injury or property damage to others. This applies if an incident occurs within the unit or in other locations, and the unit owner is found legally responsible. This coverage can help pay for legal defense costs, medical expenses for injured parties, or damages awarded in a lawsuit. Many policies offer at least $100,000 in coverage, with options for higher limits to suit individual needs.

Loss Assessment Coverage

Loss assessment coverage protects unit owners from unexpected expenses levied by the HOA. This occurs when damage to common areas or a master policy deductible exceeds the master policy’s coverage limits or falls outside its scope. For instance, if a major storm damages the building’s roof and the repair cost surpasses the HOA’s master policy limit, the HOA may levy an assessment on unit owners to cover the shortfall. Loss assessment coverage helps pay for the unit owner’s share of such an assessment, which can range from a minimal amount to tens of thousands of dollars.

Interaction with Master Policies

Understanding how an HO6 policy interacts with the Homeowners Association’s (HOA) master insurance policy is essential. The HOA master policy primarily covers the building’s structure, common areas, and shared elements like hallways, roofs, and amenities. This policy is funded through HOA fees and protects the collective interests of the community. However, the extent of coverage provided by the master policy varies, which directly influences the necessary scope of an individual HO6 policy.

Different types of master policies determine where the HOA’s responsibility ends and the unit owner’s begins. Unit owners must obtain a copy of their HOA’s bylaws and master policy to understand these distinctions. This review reveals what structural elements within the unit are covered by the HOA and what the individual owner needs to insure through their HO6 policy.

“Bare Walls-In” Master Policy

A “bare walls-in” master policy provides the most limited coverage from the HOA. This type of policy typically covers the building’s structure and common areas up to the bare walls of each individual unit. It generally does not include coverage for interior fixtures, finishes, appliances, or improvements within the unit. With a bare walls-in policy, the unit owner is responsible for insuring everything from the drywall inward, including flooring, cabinets, and built-in appliances. This necessitates a more robust dwelling coverage component within the HO6 policy.

“Single Entity” Master Policy

A “single entity” master policy, also known as “original specifications” or “walls-in” coverage, offers broader protection than a bare walls-in policy. This type covers the building’s structure, common areas, and the unit’s interior as it was originally constructed. It includes standard fixtures, flooring, and appliances that were part of the unit’s initial build. If a unit owner has made upgrades or improvements beyond the original specifications, their HO6 policy would need to cover these enhancements and all personal property. This policy type reduces some of the dwelling coverage burden on the individual owner compared to a “bare walls-in” policy.

“All-In” Master Policy

An “all-in” master policy is the most comprehensive type of HOA coverage. This policy covers the building, common areas, and virtually all permanent fixtures within the units, including improvements and upgrades. Even with an “all-in” policy, unit owners still need an HO6 policy to cover their personal belongings and personal liability. While this master policy offers extensive structural coverage, it does not typically extend to a unit owner’s movable possessions. Therefore, the HO6 policy in this scenario primarily focuses on protecting personal property and providing liability coverage.

Customizing Your HO6 Coverage

Tailoring an HO6 policy involves considering personal assets and HOA master policy details. Assessing the value of personal property is a foundational step in customizing HO6 coverage. Creating a detailed inventory of all belongings, including furniture, electronics, and clothing, can help determine an accurate coverage amount. For high-value items like jewelry or art, obtaining professional appraisals and considering specific endorsements may be necessary, as standard policies often have sub-limits for these categories.

Determining the necessary dwelling coverage for the interior of the unit is directly influenced by the type of HOA master policy in place. If the HOA has a “bare walls-in” policy, the unit owner will need more extensive dwelling coverage for their HO6 policy to insure all interior finishes and fixtures. Conversely, with an “all-in” master policy, the individual dwelling coverage needs for the HO6 policy may be reduced, focusing more on personal property and liability. Reviewing the HOA documents clarifies these specific responsibilities.

Choosing a deductible involves a trade-off between premium costs and out-of-pocket expenses during a claim. Policies with higher deductibles typically result in lower monthly or annual premiums, while lower deductibles mean higher premiums but less out-of-pocket payment in the event of a covered loss. Unit owners should select a deductible amount they are comfortable paying themselves if a claim arises, ensuring it aligns with their financial preparedness.

Considering additional endorsements or riders can further customize an HO6 policy to address specific risks or provide enhanced coverage. Common add-ons include valuable items coverage for specific high-value possessions, identity theft protection, or increased loss assessment limits beyond the standard policy amount. When seeking a quote, insurers will typically request details such as the unit’s square footage, construction type, and information about the HOA’s master policy to accurately assess risks and provide tailored options.