A unit owner’s condo insurance policy is known as an “HO-6,” and this type of policy must – at a minimum - provide coverage for your belongings; personal liability; and protection for the interior structural parts of your unit (i.e. the parts not covered by the Association’s Master Policy).
When does the condo dweller need insurance?
Ø Damage to interior of unit.
o TAKE NOTE: Know what type of Master Policy your HOA carries:
1. “All-In” policy – typically covers all the original items built into your place.
2. “Bare Walls” policy – typically covers only the walls, floor and ceiling in your place.
Ø Belongings are stolen or damaged.
o Provides personal property coverage.
Ø Guest(s) are hurt in your home.
o Helps to cover medical bills and liability costs if sued.
Ø Condo is uninhabitable due to damage covered by your policy.
o Pays for expenses related to living elsewhere.
Ø Damage exceeds the HOA’s policy limit.
o The HOA will usually fund their insurance costs in three ways:
1. Paid from the reserves of the association
2. Paid by assessing all the unit owners
3. Paid by assessing a single unit owner
5 Tips In Setting Up a Condo Policy:
1. Determine if the Master Policy is considered “All-In” or “Bare-Walls.”
a. If unknown, always assume you are responsible for everything structural inside your unit, including carpeting, hardwood flooring, countertops, built-in appliances, etc.
2. Make a list of all structural items you must insure & estimate the labor/materials cost to replace each.
a. Total up the values & add a 20% cushion. The adjusted total is the amount of structural coverage to buy.
3. Know what kinds of losses are covered on both the building and contents; broaden coverage from “Named Perils” to “Open Perils.”
a. “Named Perils” – policy tells you what perils will be covered in event of a loss.
b. “Open Perils” – policy lists any perils that are excluded from coverage so unless the peril is specifically excluded all perils are covered.
4. Buy “loss assessment coverage” to cover assessments made by the HOA for coverage shortfalls in the Master Policy.
a. Recommended minimun of $50,000 coverage amount.
5. Know the Master Policy deductible and buy dedutible assessment coverage for that amount.
a. TAKE NOTE: Many HOAs make individual unit owners responsible for the entire Master Policy deductible if the loss is confined to their unit (e.g. if a pipe breaks in a unit and floods that condo).
Customized coverages for condo and co-op owners include:
Ø Contents replacement
Ø Additions and alterations
Ø Building ordinance
Ø Endorsements for jewelry, fine arts, and silver