It is a common misconception that only home owners should be concerned about property insurance. Nothing could be further from the truth. Wherever your personal property resides, it should be covered against loss or damage. It’s usually not a question of if you will need insurance protection, but when you will use it.
Condo insurance is a valuable and necessary investment for any property owner. As a condo owner, you, not the condo association, are responsible for your property and possessions. Personal condo insurance is an important part of financial stability. Usually the condo association will carry a basic master policy to cover all units. Condo insurance carried through the association typically falls under one of three categories:
1) Insurance for the common areas and the building structure but not the appliances, cabinets or flooring in individual units.
2) Insurance for the building and items in the unit except for personal property.
3) Insurance for the building plus fixtures and improvements provided by the unit owner.
If basic condo insurance is provided by the association, the condo owner should seek a separate policy for additional coverage. Most mortgage lenders will require a level of insurance coverage to qualify for a mortgage. Items typically covered by a unit owner policy would be:
1) Items not covered by the association policy.
2) Building additions or owner alterations.
3) Owner updates that provide increased value.
4) Losses not compensated for by the deductible on the association policy.
5) Typical property insurance coverage of personal possessions.
In the event there is no association policy in place, the condo owner should seek a more comprehensive condo insurance policy that would cover the basic building structure, similar to the policy a conventional home owner might seek. Always choose replacement value insurance of the current cost of your property. Everything will cost more tomorrow to replace than it cost today to purchase.
Condo insurance purchased by the condo owner will cover the usual variety of loss and damage, such as: fire, theft, explosion, smoke damage, vandalism, falling objects and property belonging to guests at your residence.
Basic condo insurance will not cover everything however. You should be aware that flood damage, earthquakes, mudslides, building settling, sewer backups, acts of terrorism, natural disasters and damage by birds or insects may not be covered. Separate coverage can be obtained if you live in a flood or earthquake prone area. If your condo is used for business activities, you may need to seek specific coverage for that purpose as well. Consider the option of including liability coverage to protect your assets from lawsuits in the event of negligence or injury.
As with any type of insurance, condo insurance carries a deductible. The higher the deductible, which is the amount of loss you will pay before the insurance coverage begins, the lower the premium you will be required to pay. As with other types of insurance policies, deductibles of $250, $500 or $1,000 are quite common.
You must determine the correct amount of coverage when purchasing a condo insurance policy. This is more than just the value of the condo itself. It is important to begin with a complete inventory of all possessions. If possible, include the date of purchase, the price paid at the time of purchase and a picture of the item. Store your inventory list safely at a location other than your home. It will do you no good to have an inventory list of your possessions if the list is destroyed at the same time as your condo.
While you’re at it, it’s wise to choose replacement value condo insurance over an actual cash value policy. That way, the insurance company will reimburse you for the cost of replacing your valuables at current cost, which will almost certainly be more than you paid for them originally.
Condo ownership brings with it the same responsibilities as any other type of property ownership. Don’t get caught up in the thinking that the condo association will provide your needs. The extent of their protection will be limited at best. The best bet for protecting your financial security is the relatively inexpensive option of individual condo insurance.