What Is HO6 Insurance and What Does It Cover?

Homeowners insurance provides financial protection against damage to a home, its furnishings, and personal belongings, and offers liability protection against accidents on the property. For condominium or co-op unit owners, an HO6 policy addresses their unique coverage needs. This article clarifies what an HO6 policy entails.

The HO6 Policy Defined

An HO6 policy, often called “Condo Insurance” or “Unit-Owners Insurance,” is designed for condominium or co-op unit owners. This policy addresses the unique insurance requirements of unit owners, covering the interior structure of their individual unit and their personal belongings. Unlike traditional homeowners insurance that covers an entire standalone house, an HO6 policy focuses on the specific unit within a larger building structure.

The primary purpose of an HO6 policy is to fill coverage gaps left by the Homeowners Association (HOA) master insurance policy. While the HOA’s master policy typically covers the building’s exterior, common areas like lobbies and hallways, and the overall structure, it generally does not extend to the individual unit’s interior or the owner’s personal property. An HO6 policy therefore becomes a necessary complement to the master policy.

Unit owners are responsible for their unit’s interior, including fixtures and improvements. An HO6 policy covers damages to these elements. It is commonly required by mortgage lenders and condo associations to ensure that the individual unit is adequately protected.

Essential Coverage Elements

HO6 policies include several components that protect unit owners from financial losses. These components cover the unit’s interior, personal belongings, and potential liability claims. Each element plays a distinct role in providing comprehensive protection.

Dwelling Coverage (Interior Unit Coverage)

Dwelling coverage protects the interior structure of the condominium or co-op unit. This includes “walls-in” elements like floors, interior walls, ceilings, cabinetry, sinks, tiling, and other permanent fixtures. It also extends to alterations and improvements made by the unit owner, such as upgraded countertops or flooring.

Personal Property Coverage

Personal property coverage protects the unit owner’s belongings against damage or theft. This includes items such as furniture, electronics, clothing, appliances, and other movable goods. This coverage applies whether the belongings are inside the unit or temporarily located elsewhere. The amount of coverage typically ranges from 50% of the dwelling coverage limit.

Personal Liability Coverage

Personal liability coverage provides financial protection if the unit owner is found legally responsible for bodily injury to another person or damage to someone else’s property. This can include incidents within the unit, such as a visitor slipping, or accidental damage to another unit or common area. This coverage helps with legal fees, medical bills, and settlement costs. Most HO6 policies offer a minimum of $100,000 in liability coverage, with options to increase this limit.

Loss of Use (Additional Living Expenses)

Loss of use coverage, also known as additional living expenses (ALE), provides financial assistance if the unit becomes uninhabitable due to a covered peril. This coverage helps with temporary living costs while the unit is being repaired or rebuilt. Covered expenses can include hotel stays, temporary housing, and restaurant meals. This coverage is generally included in standard HO6 policies and is often calculated as a percentage, such as 20% to 30%, of the dwelling coverage limit.

Key Policy Details

Specific policy details clarify how claims are processed and how the HO6 policy interacts with other insurance coverages.

Deductibles

A deductible is the amount a unit owner must pay out of pocket before insurance coverage begins for a covered loss. For HO6 policies, deductibles apply to claims for damage to the unit’s interior or personal property. Deductible amounts vary, impacting the final out-of-pocket expense. Typical deductibles for property claims range from a few hundred dollars to several thousand dollars.

Understanding the HOA Master Policy’s Role

The HOA’s master policy covers the building’s overall structure, common areas, and exterior, such as roofs, lobbies, and shared amenities. The HO6 policy complements this by covering what the master policy does not, specifically the interior of the individual unit and the unit owner’s personal property. For instance, if a fire damages both common areas and the interior of a unit, the master policy addresses the common area damage, while the HO6 policy covers the unit’s interior and belongings.

Common Endorsements

Unit owners can enhance their HO6 policy with optional endorsements or riders, which provide coverage for specific situations not covered by a standard policy. One common endorsement is “Loss Assessment” coverage, which helps pay for a unit owner’s share of large expenses levied by the HOA if the master policy’s limits are exceeded for a covered loss affecting common areas. Another endorsement is “Water Backup” coverage, which addresses damage caused by water backing up through sewers or drains, a peril often excluded from standard policies. Coverage for specific valuables, such as jewelry, art, or collectibles, can also be added through scheduled endorsements.