Understanding what your condo insurance covers is one thing—understanding why a condo owner pays what they do for insurance is very different. So, how does your premium get calculated?
One common misconception is that homeowners insurance and condo insurance can be lumped into the same category. As previously mentioned in “What is a Master Policy?”, one of the advantages of condo ownership is that the unit owner is typically only personally responsible for insuring the interior of the property. Here are some factors that an insurer may consider when deciding your condo insurance premium:
Rebuilding Cost of Your Unit: Condo owners are commonly responsible for everything in their unit from the walls in. If anything in this space were to be destroyed, the rebuilding cost is the amount it would take to restore it to its original beauty. If you’re financing a mortgage on your condo, lenders often require you to have a percentage of this amount.
How Much Your HOA Insures: In the typical condo community, the Homeowners Association (HOA) insures the exterior walls of your unit and shared amenities such as the pool and gym. However, in some cases, the HOA policy coverage is extended to cover the structural elements inside of your unit.
If this is the case, the unit owner may require less overall condo insurance.
How Much Your Belongings Are Worth: Since your HOA covers many of the damage and liability claims in the building, the main thing condo owners have to worry about is protecting personal belongings. The HOA coverage will likely not cover unit owners material things, so it’s their responsibility to cover that lapse in insurance. The more stuff you have to protect, the higher your premium could be.