Know How Home Insurance Is Different for Condos
Whether you choose to live in a condo or a house, you certainly want to protect the place you call home against damage or loss. Having a strong, customized homeowners insurance policy is a must, but if you are new to condo insurance, you should know how it is different from buying insurance for a house. To shop for condo insurance with confidence, keep in mind the following questions and answers, and discuss with your insurance agent.
What’s the Main Difference Between Insuring a Condo and a House?
When insuring a house, you purchase coverage for the entire house — both the structure itself and the contents inside, plus liability insurance to protect against injury claims. Condos are different: You do not purchase coverage for the structure because the building is owned and insured by a separate entity, your homeowners association (HOA). Accordingly, condo insurance focuses on protecting the contents of your home, plus liability coverage.
How is the Condo Building Itself Insured?
The HOA will have a “master” insurance policy that covers the building structure and all common spaces. The premium costs for this policy are shared among the condo owners and, in the event of a claim, the deductible also is paid by the condo owners. There are two main types of master policy — “walls-in” or “shell.” It’s critical that you know which your HOA has chosen; this will have a significant effect on how your agent customizes your homeowners policy.
What are the Differences Between “Walls-In” and “Shell” Master Policies?
A walls-in policy offers the most protection. In the case of a fire that totally destroys your unit, this type of policy would restore your condo to a pre-sale condition. Flooring, wall finishes, fixtures and oftentimes appliances will be totally replaced. A shell policy, on the other hand, offers much less protection. If a fire destroys your condo, it will be restored to a very basic state: bare walls and subfloor, no fixtures or appliances, and you may even be responsible for replacing plumbing and wiring. The details of your master policy should be outlined in the HOA contract you received when you purchased the condo.
What are Special Coverage Considerations fo Condo Homeowners Insurance?
There are a number of coverage choices that should be considered differently when insuring a condo; discuss these options with your agent.
- Coverage for loss assessment: When a condo building is damaged, the master policy covers the loss. The deductible on this policy may be extremely high, and each individual condo owner will be assessed a portion of the deductible that they are responsible for paying. Even divided among all the condo owners in an HOA, this could still amount to tens of thousands of dollars each. Adding loss-assessment coverage to your homeowners policy will cover your portion of the deductible.
- Coverage for unit upgrades: Although a walls-in master policy covers your appliances, fixtures and finishes, it only considers the original, pre-sale state of the condo. If you have made significant upgrades to your unit, such as stainless appliances, granite countertops or hardwood floors, these improvements would not be covered. You’ll need to add additional coverage to your homeowners policy.
- Coverage for loss of use: Loss-of-use coverage pays for the costs of renting a home while your home is being rebuilt or repaired after sustaining damage. When insuring a condo, the default amount of loss-of-use coverage on a homeowners policy may be too low, especially if you live in an area with sky-high rental costs, such as Seattle. In addition, keep in mind that repairing a heavily damaged (or destroyed) condo building can take months at least.
Navigating the complexities of insuring a condo is no simple matter. Speak today with a knowledgeable agent who can guide you through the process and ensure that your homeowner coverage protects you from whatever may threaten your most prized possession: your home.
– Written by Matt Forrest, last updated in December 2022.
