What Is HO-6 Insurance and What Does It Cover?

An HO-6 insurance policy is a specialized form of homeowners insurance for condominium or cooperative unit owners. It protects the interior of the individual unit, personal belongings, and provides liability coverage, complementing the master insurance policy held by their homeowners association (HOA) or cooperative. Unlike traditional homeowners insurance, HO-6 policies focus on the interior space and personal assets, as the building’s structure and common areas are generally covered by the association’s policy. Mortgage lenders often require HO-6 insurance to protect their financial interest in the property.

What is HO-6 Insurance?

HO-6 insurance, commonly known as condo insurance, is designed for condominium and cooperative unit owners. This policy covers aspects of the unit not included in the building’s master insurance policy, focusing on the individual owner’s property and potential liabilities. Owners require a separate policy because they own their unit but also share responsibility for common elements. An HO-6 policy fills the gap between the association’s master policy and the individual unit owner’s responsibilities. It protects the interior of the unit, including fixtures and improvements, personal belongings, and provides liability protection.

Core Coverages of HO-6 Policies

An HO-6 policy encompasses several types of coverage to protect a unit owner from physical damage and personal liability. Understanding each element helps unit owners secure appropriate protection.

Dwelling coverage, or “walls-in” coverage, protects the interior structure of the condominium unit. This includes elements from the drywall inward, such as interior walls, floors, ceilings, built-in appliances, cabinets, and fixtures. It repairs or replaces these components if damaged by a covered peril, like fire or a burst pipe. The extent of this coverage can depend on what the condo association’s master policy already insures.

Personal property coverage protects the unit owner’s belongings, such as furniture, electronics, and clothing. This coverage applies to damage or loss caused by specific perils listed in the policy, including fire, theft, wind, and hail. It may also extend to items kept outside the unit, such as belongings stolen from a vehicle.

Loss of use coverage, also known as additional living expenses, provides financial assistance if the unit becomes uninhabitable due to a covered loss. This coverage helps with temporary housing costs, meals, and other increased living expenses while the unit is being repaired or rebuilt. The reimbursement typically covers expenses that exceed normal living costs.

Personal liability coverage offers protection if the policyholder is found legally responsible for bodily injury or property damage to another person. This includes incidents within the unit, such as a guest slipping, or damage to another unit or common area due to negligence. It can help cover legal expenses, medical bills, and settlement costs.

Medical payments coverage addresses minor injuries sustained by guests in the unit, regardless of fault. This coverage typically has a lower limit than personal liability and aims to cover immediate medical bills, helping to prevent potential lawsuits for small claims.

Distinctions from Master Policies

Understanding the differences between an HO-6 policy and a homeowners association’s (HOA) master policy is important for comprehensive coverage. The HOA master policy covers the building’s overall structure, common areas, and external elements, such as lobbies, elevators, hallways, roofs, and recreational facilities. The HO-6 policy complements the master policy, covering what it does not.

While the master policy protects shared infrastructure, the HO-6 policy insures the interior of the individual unit and the owner’s personal property. For example, if a storm damages the building’s roof, the master policy covers the repair. If a subsequent leak damages furniture inside a unit, the HO-6 policy covers the personal property.

The scope of the HOA master policy directly influences the necessary dwelling coverage for an HO-6 policy. Master policies fall into three categories: “bare walls-in,” “single entity,” and “all-in” or “all-inclusive.” A “bare walls-in” policy covers only the building’s shell, leaving the unit owner responsible for everything inside their unit, including fixtures, flooring, and appliances. A “single entity” master policy expands coverage to include fixtures within individual units, such as built-in cabinets and original appliances, but often excludes improvements or alterations made by the owner. The “all-in” coverage insures the entire interior structure of the unit as originally constructed, including fixtures and any improvements or alterations. Unit owners should review their HOA’s master policy to ensure their HO-6 coverage addresses any potential gaps.

Customizing Your HO-6 Coverage

Tailoring an HO-6 policy to individual needs ensures adequate protection for personal assets and unit improvements. Unit owners should assess the value of their interior dwelling components and personal belongings to determine appropriate coverage limits. This assessment helps prevent underinsurance or overpaying for unnecessary coverage.

Dwelling coverage limits should reflect the cost to repair or replace the interior elements of the unit, including any upgrades or renovations. If significant improvements have been made, such as high-end flooring or custom cabinetry, dwelling coverage should be sufficient to cover these enhanced values. Understanding the master policy’s type is also important, as it dictates how much interior structural coverage is needed.

Personal property limits should correspond to the total value of all personal belongings within the unit. Taking a home inventory can help estimate this value. For high-value items like jewelry, fine art, or collectibles, standard personal property limits may be insufficient, necessitating additional coverage through scheduled personal property endorsements or floaters.

Deductible choices affect the premium amount and out-of-pocket expense in a claim. Higher deductibles result in lower premiums but require the policyholder to pay a larger amount before coverage begins. Conversely, lower deductibles mean higher premiums but less out-of-pocket cost. Optional endorsements or riders can enhance an HO-6 policy to address specific risks. Loss assessment coverage is a common add-on that helps cover expenses if the HOA levies a special assessment on unit owners for damages to common areas that exceed the master policy’s limits or deductible. This is relevant as master policy deductibles can range from $10,000 to $50,000 or more, and unit owners may be assessed a portion. Other endorsements can include coverage for identity theft or specific perils like earthquake damage.