What Kind of Insurance you need for a Condo

How to buy the correct amount of coverage for your condo unit

Many condo associations now require individual unit owners to carry their own insurance for their units. Insuring a condominium unit is a little trickier than insuring a home, because your association pays for the outside of the building. You own the unit itself from the drywall in, which means that in the event of a fire, hurricane, or other catastrophe, your association will not pick up the tab on damages occurring inside your condo, with the exception of structural damage to the building.

Look at it this way. If you take your condo, hang it upside down and shake it, everything that falls out is considered to be contents. Your clothing, your furniture, your electronics, and even your major appliances, i.e., washer, dryer, dishwasher, and stove are contents. Everything that is permanently attached to the inside of the unit is considered to be dwelling. Your cabinets, counters, flooring, paint, tile, bathroom fixtures, and doors are all considered to be part of the dwelling. Knowing how to separate your belongings into those two categories is half the battle.

You are now ready to calculate your coverage. Walk around your unit and think about how much it would actually cost you to replace everything in the event of a total loss, using fire as an example because it eats everything. Taking stock of what you actually have and how much it costs will help you to come up with some rough figures before you call an agent and start asking for quotes.

A sample condo policy looks something like this:

Coverage A

Dwelling: $30,000

All other Perils Deductible: $500.

Coverage C

Contents: $25,000

Hurricane/Wind Deductible: $500.

Coverage D

Loss of Use: $5,000

Coverage F

Liability: $100,000

Coverage G

Medical Payments: $2,000

Loss Assessment: $2,000

Loss of use coverage is often expressed as a percentage of the contents in your unit, and will be used to determine how much money to give you to live somewhere else in the event that a catastrophe makes it impossible for you to live in your home after a loss.

Liability Coverage helps to protect your personal assets in the event that you are sued, usually in relation to a property damage liability claim arising from an incident at your home that causes damage to another person and/or their property for which you may be held legally liable.

Medical Payments coverage does not pay you or your spouse or resident relatives in the event one of you becomes hurt in your home. Think of it this way: Medical payments coverage on a condo policy means “Make the hurt person happy so they won’t sue you”. Med Pay is voluntary coverage that you can use at your discretion whether or not you are legally liable for the incident that caused injury to someone else.

Loss Assessment coverage helps you to keep your out of pocket expenses down after a catastrophe that caused structural damage to the building and/or common property, for which the unit owners are assessed by the association to help pay for the repairs to the building. Loss assessment claims may be put in only for claims that would be covered under your own policy. If the association decides they want to repave the parking lot or build tiki huts by the pool, and assesses the unit owners for those choices, they would not be eligible for loss assessment claims.

Because there are many different carriers throughout the United States that offer HO6 condo unit policies, it will be possible for you to shop your coverage. It is a good idea to find out what each carrier offers in the way of optional coverage and additional coverage, and what perils are covered under each policy, rather than by going on price or name brand appeal alone.

In addition, you may have items of special value that would need to be scheduled specifically onto your policy for their appraised value, such as jewelry, artwork, or heirlooms. Many carriers require insureds to provide appraisals for these items within the last twelve months, as well as photos of the items themselves.

Whatever coverage you choose with which carrier, it is important for you to read the insurance contract before signing it, as it is considered a legal contract, and once your signature is on it, you are bound to uphold the same terms and conditions as the carrier who provides the insurance.

In conclusion, understanding the coverage on your condo policy, as well as how it works, can help it work for you, and that is your goal; to choose a comprehensive policy that offers you the best coverage for the premium paid.