Condo insurance — also known as an HO-6 policy — protects everything within the walls of your unit.
Despite condo insurance being in an entirely different insurance arena than homeowners or renters insurance, it shares similar elements. Unlike a homeowners policy, condo insurance doesn’t cover damages to the surrounding area or the exterior walls of your condo. It provides coverage for the interior of your residence and any personal belongings within the unit. Coverage for the exterior of your condo and common areas is built into what is referred to as a master policy or an HOA policy, maintained by the owner of the condominium complex. Your condo policy and your condo association master policy work together to protect your property and belongings.
The term HO-6 is synonymous with condo insurance. Homeowners policies are typically broken down into HO-2, HO-3, and HO-5 policy types. The distinctions within these policies refer to what they will and will not cover. For a condo owner, your condo insurance fits into a modified HO-2 policy, known as an HO-6. This insurance policy is what the insurance world refers to as a "named-peril policy," meaning all risks that will be covered are named within the policy contract.
Because you don't actually own the entire building in which your condominium resides, condo insurance works a bit differently than a standard homeowners insurance policy. The HOA policy covers things that your personal condo insurance policy won't, such as the grounds, common areas, and most external features. Let’s explore these risks further.
Within the physical damage portion of your condo insurance contract, there are some caveats dependent on the HOA master policy plan. Condominium associations are likely to have one of the following options.
What is covered by condo insurance?
What isn’t covered by condo insurance?
|Fire and smoke damage||Earthquake damage|
|Explosion damage||Flood damage|
|Wind and hail||Intentional damage|
|Theft or malicious theft||Nuclear hazards|
|Vandalism||Routine wear and tear|
|Riots, civil commotion|
|Vehicles not owned or operated by a resident|
Regardless of whether you have an “all-in” or “bare walls” type of HOA policy, you need a condo insurance policy in order to protect your personal property. Your personal belongings include items like computers, TVs, and furniture. As is the case with homeowners or renters personal property coverage, this coverage follows you around the world.
Your liability coverage provides protection in the event a claim is brought against you or a resident of your condo due to bodily injury or property damage. This includes settlement, defense, and court costs. Excluding your monetary limit and deviations within individual insurance companies, your liability coverage mirrors that of the coverage offered by homeowners or renters insurance.
In the event your condo is unlivable, loss of use coverage provides monetary compensation for you to live elsewhere temporarily. The amount of compensation and duration of it is dependent on the coverage you set personally with your insurance company.
Loss assessment coverage is unique to condo owners and works to help cover the master policy if their limits are exceeded by a claim. For example, if a fire causes multiple units to be damaged and the amount of the damage exceeds the coverage limit set in the master policy, your loss assessment steps up to assist in paying a portion of the fire damages.
Med Pay provides for medical coverage in the event someone injures themselves while on your property or is injured by your activities. Unlike your liability coverage, this excludes anyone who is a resident of your condo. Hence, the medical payments “to others” aspect.
Co-op insurance provides coverage to residents of a housing co-op. Housing co-ops are a popular buying option in major cities such as Chicago and New York City. Condo units and co-ops share certain similarities, but they are actually quite different.
Both residences are in multi-unit structures, but differ in how ownership is handled. Condo owners own a specific unit, while residents of a co-op do not. Co-op owners actually own a share of the whole building and have a lease or contract that allows them to live in their unit. Ownership of a co-op is purely through shares of a corporation comprised of other residents of the building.
In short, they're not. A co-op insurance policy works in the same way that condo insurance does in that it only covers the interior of your private residence. This protects your belongings and provides personal liability protection through an HO-6 policy. The building itself must have a separate policy that covers shared areas such as hallways and stairwells. The co-op insurance policy also provides liability coverage for the co-op board members and is listed in the name of the corporation itself.
There are plenty of opportunities to insure your property through additional coverage options. Here are a few common additions to condo insurance:
Something you may want to consider is what insurance companies refer to as “floaters,” “riders” or “endorsements.” Essentially, an endorsement is additional coverage for a high-priced category of an item that exceeds the normal limits of your policy. For example, imagine that someone on your condo policy owns a very expensive ring that is valued at $15,000. Because most insurance companies cap their coverage for jewelry well below $15,000, you would need an endorsement or floater to make sure your jewelry is properly covered. While it varies by company, floaters extend to other items as well as jewelry — such as works of art, musical equipment, and even guns.
Continuing with the theme of endorsements, a scheduled endorsement or floater is for one specific item of high value — rather than the above described unscheduled endorsement which is specific to a category of item. Within this type of coverage, you must take the item (jewelry, fine art, a piece of equipment) to get appraised. Once appraised, your insurance company will determine a premium based on the appraisal.
Damages resulting from floods are not covered by an HO-6 condo policy or a master policy. Typically, flood insurance is provided by FEMA, which is the Federal Emergency Management Agency. Depending on your location, your mortgage lender may require you to purchase flood insurance.
Although a basic condo owners insurance policy doesn’t offer any coverage — nor would an HOA policy — against identity theft, most companies offer an endorsement to make sure you are financially protected. While it varies per company, coverage ranges from $15,000 to $30,000 per occurrence and typically costs between $25 and $65 per year.
If your plants, trees, or shrubs suffer damage caused by a covered peril (see above), you can be covered up to 5% of your personal property limit and usually accompanied by a dollar limit for any one item. However, you should look into your HOA policy to see if they provide coverage for your plants prior to adding this coverage.
This coverage applies to the removal of debris from your property after a covered loss. Like the case with coverage for your trees, shrubs, and other plants, check with your master policy within your condo complex to see if they will cover this before you add it to your policy.
In the event of power loss or machine failure, this coverage will reimburse you for the contents of your fridge. There are plenty of coverage options from which to choose when shopping for condo insurance.
If you’re shopping for condo insurance or even if you already have it, you should consider some simple steps to make sure you’re both properly covered and not overpaying.
By going through all your personal belongings, both big and small, you can adequately determine how much insurance coverage you need. Plus, in the event of a claim, you can quickly determine what is missing.
Because a condo policy has the additive of a master policy, you should thoroughly check it to make sure you are not under-insured or over-insured with your condo insurance coverage. If you assume your master policy covers something it doesn't, you risk not being insured. Furthermore, you could save yourself some premium by reducing your personal coverage because your HOA already covers something.
Pay attention to coverage limits for specific items. If you purchase a new jewelry item that exceeds your policy’s limit, you risk not having sufficient coverage. Consider additional endorsements and floaters with any newly purchased valuable item.
While discounts vary per insurance company, typical condo insurance discounts are multi-policy (condo and auto), claims free, non-smoker, and security discounts. Look closely at your policy to see if you or your condo qualifies for any possible discounts.
Insurance companies see things like mold and general disrepair as liabilities and will charge you accordingly for them. As a condo owner, it is important to maintain its structural integrity to ensure your premiums don’t climb unnecessarily.
Your lender may require you to have condo insurance even if your unit is already covered under an HOA or master policy. HOA policies — whether your condo association has all-in or bare-walls coverage — leave many gaps when it comes to coverage for your personal property, liability, additional living expenses, loss assessment, and medical payment to others. Generally, these master policies only cover exterior structures, common areas, and only sometimes covers specific original items built-in inside the unit — like paint, carpet, and fixtures.
Unlike auto insurance, there is no legal mandate that requires condo insurance. But like renters and homeowners insurance, it's reassuring to have a level of coverage that personally protects you and your property. It's important to understand that your condo's master policy does not cover your personal belongings — so if you're worried about potential perils causing damage to your condo, it's simply a smart decision to opt for the additional layer of coverage that a separate condo policy delivers.