What Is HO6 Condo Insurance and Why Do You Need It?

An HO6 insurance policy, often called condo insurance, is a specialized form of homeowner’s insurance designed for individuals who own a condominium or co-op unit. Its primary purpose is to protect the unit owner’s investment in their individual living space, including the interior structure and personal belongings. This policy works in conjunction with the master insurance policy held by the homeowners’ association (HOA) or co-op board, which typically covers the building’s exterior and common areas. An HO6 policy fills the coverage gaps that the master policy does not address, providing essential financial protection for the unit owner.

Key Coverages

An HO6 policy includes several core components that provide protection for a condo unit owner.

Dwelling Coverage

Dwelling coverage protects the interior structure of the condo unit. This includes elements from the “walls-in,” such as interior walls, flooring, cabinets, fixtures, and any improvements or alterations made to the unit. The master policy often does not extend to these interior components, leaving the unit owner responsible for repairs or replacement.

Personal Property Coverage

Personal property coverage safeguards the owner’s movable belongings within the unit, such as furniture, clothing, and electronics. This coverage can be based on actual cash value (ACV), which accounts for depreciation, or replacement cost value (RCV), which covers the cost to replace items without depreciation.

Personal Liability Coverage

Personal liability coverage provides financial protection if the policyholder is found legally responsible for bodily injury or property damage to another person. This covers legal expenses, medical bills, and other related costs if someone is injured inside the unit or if the policyholder accidentally causes damage to another unit or a common area.

Loss of Use Coverage

Loss of use coverage, also referred to as additional living expenses, helps cover costs if the condo unit becomes uninhabitable due to a covered loss. This covers expenses like temporary housing and meals, helping maintain the policyholder’s standard of living during displacement.

Determining Your Specific Coverage

Assessing individual needs is a crucial step to ensure an HO6 policy provides adequate protection. This involves understanding the existing master insurance policy and evaluating personal assets.

Reviewing the Master Policy

Reviewing the homeowners’ association’s (HOA) or co-op’s master insurance policy is crucial. It dictates what structural elements are covered, influencing the necessary dwelling coverage for an HO6 policy.

Master policies typically fall into two main categories: “bare walls-in,” which covers only the basic structure and requires the unit owner to insure fixtures and improvements; and “all-in,” which is more comprehensive, covering nearly everything inside the unit except personal belongings.

Inventory Personal Belongings

Creating an inventory of personal belongings helps assess their value for personal property coverage. List items with details like make, model, and purchase date, and estimate their current value. Photographing items and keeping receipts for high-value possessions provides valuable documentation, aiding in determining coverage and expediting claims.

Improvements and Betterments

Account for improvements and betterments made to the unit, as these might not be covered by the master policy. Upgrades like new flooring or cabinetry should be factored into dwelling coverage to protect these investments.

Additional Coverages and Endorsements

Consider additional coverages and endorsements for broader protection. Optional coverages include water backup, identity theft, or scheduled personal property for high-value items. Depending on location, flood or earthquake insurance may also be necessary, as these are typically excluded from standard HO6 policies.

Deductibles and Policy Limits

Understand deductibles and policy limits. A deductible is the out-of-pocket amount paid before coverage begins. Policy limits are the maximum the insurer will pay. Select appropriate deductibles and limits by balancing potential costs with premiums, based on your risk tolerance and financial capacity.

Acquiring an HO6 Policy

Once coverage needs are determined, acquiring an HO6 policy involves several steps. Various avenues exist for obtaining and comparing insurance quotes.

Obtaining Quotes

Obtain quotes from independent agents, captive agents, or directly from insurers online or by phone. Compare quotes from several providers for competitive rates and suitable coverage.

Information for Quotes

When seeking quotes, provide specific information about the unit, estimated personal property value, and desired coverage amounts and deductibles. Details regarding the HOA’s master policy, including its type and limits, are also essential for accurate policy tailoring.

The Application Process

The application process involves submitting information and reviewing quotes. After selecting a policy, complete an application form, which confirms details and initiates underwriting.

Policy Issuance

After application submission, the insurer reviews and, if approved, issues the policy. Policy documents detail terms, conditions, coverages, exclusions, and payment schedules.