Unlike homeowner’s or renter’s insurance, condo insurance provides unit owners an insurance policy tailored to their needs, taking into account the master insurance policy held by the condo association.
While there are many ways in which condo insurance is similar to homeowner’s or renter’s insurance, there are also some consequential differences.
The Master Policy. Unit owners of properties that make up a condominium complex have a joint responsibility to insure common areas, so the condo association purchases an insurance policy known as the master policy. This policy is funded from dues paid by all unit owners within the complex. Reviewing this is critical to understanding what parts of the complex are insured by the master policy and which are not, as well as association rules.
While there are many exceptions, the two primary master policies are “bare walls” and “all-in.”
Generally speaking, “bare walls” policies will cover all real property from the exterior framing inward, but not the fixtures and installations inside the unit. Note that “real property” refers to land and buildings—buildings meaning structures themselves and not what is known as “personal property,” the materials in the buildings. In a “bare walls” policy, even things that can feel like they are part of the building, like the granite countertop the unit owner installed or fixtures like kitchen cabinets, are most likely not insured.
“All-in” policies, on the other hand, offer broader coverage and usually include items such as appliances (refrigerator, stove, hot water heater), wiring, plumbing, carpeting, countertops, lighting, and flooring.
Understanding a condo master policy is critical to ensuring that the unit owner is purchasing adequate insurance.
HO-6 Policies. The individual policy you will purchase is commonly known in the industry as an HO-6 Policy.
As is the case with homeowner’s and renter’s policies, it covers the following:
- Personal property, such as books, computers, furniture, etc.
- Personal Liability, typically for everything from slip-and-fall accidents on your property, to a rock thrown by your ten-year-old
- Damage to or loss of use of your unit caused by fire, storm, and a number of other perils.
A good general approach to evaluating HO-6 policies is to start by asking “what does it cover with respect to personal property?” With a homeowner’s policy, the first consideration is usually coverage of the structure. But when it comes to condos, the master policy covers the structure, so the purpose of an HO-6 policy is first and foremost to cover what is owned within the structure, along with liability coverage.
Deductibles or Exclusions in the Master Policy. While a master policy tends to provide broad coverage, there will likely be deductibles and exclusions. Most HO-6 policies offer what is called “contingent insurance” which provides coverage for shortcomings in the master policy. That is to say, if a liability arises in a common area of the condo complex and the unit owner is sent a bill (often called a “special assessment”) for their share of the loss due to a deductible or exclusion in the master policy, contingent insurance covers it. It is usually in the amount of 250% of the personal property limit in your HO-6 policy or $50,000, whichever is greater.
Don’t Be Caught Short. As with all insurance, unit owners should work with a qualified broker or agent to determine their needs, and understand the condo master policy.