What Is Condo Insurance and Do I Need It?

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What Is Condo Insurance and Do I Need It?

Condo insurance is similar to homeowners insurance but is a specialized policy because your home structurally shares the same building with other units.The condo association should have its own master policy, but your individual coverage is also required to get a mortgage. Having your own insurance also helps protect you from individual liability and covers your belongings.

If you’re thinking of moving to a condo or already live in one, find out the key features of condo insurance so you know exactly what is (and isn’t) covered. You can also create a smart strategy for getting the best price and plan from a reputable insurance carrier.

HOA vs. condo insurance

Your homeowners association (HOA) and condo insurance are two separate things. The HOA typically maintains communal property in accordance with its bylaws. You usually have to pay a fee, either monthly, quarterly or annually. Before you place an offer on a condo, find out the cost of your HOA fees, the frequency they’re due and what they cover. You pay your HOA directly, not your mortgage lender.

Your condo insurance, however, is paid to your lender as part of your monthly payment. It’s held in an escrow account (alongside your property taxes) and gets paid to the insurer by your lender. It doesn’t cover communal and structural features in most cases but instead focuses on the internal components of your condo.

What’s covered by an HOA?

Your HOA fee, no matter how often it’s charged, covers areas that are shared by multiple condo owners. In most cases, it covers things like:

  • Basement
  • Elevator
  • Exterior siding
  • Landscaping
  • Roof
  • Walkways

When house hunting, ask your real estate agent to find the HOA’s bylaws so you can see everything the HOA will include. Depending on the neighborhood, you might also get access to amenities like a pool, park or gym. The amount of your condo HOA generally reflects the amount of perks and coverage you receive as a resident.

Also, note that your HOA can charge fines and penalties if you don’t abide by the rules or if you pay your dues late (or not at all).

What does condo insurance cover?

Your condo insurance (also known as an HO-6 policy) protects you for things that aren’t covered by your HOA. It can help you repair your unit in case some type of catastrophic event occurs, such as fire, theft or a natural disaster. Check your policy to see what type of incidents are covered and to see if you need extra coverage. For instance, if you live in a flood plain you’ll likely need additional coverage to protect against infringing water.

Here’s a list of common occurrences that are covered under an HO-6 policy for condos.

Event Covered Not covered
Fire and/or lightning
X
Wind and/or hail
X
Explosions
X
Damage from aircraft or vehicles
X
Theft or vandalism
X
Volcano
X
Smoke
X
Water leak from plumbing or household appliance
X
Frozen pipes
X
Natural Perils
X

As you can see, condominium insurance is relatively comprehensive and is on par with traditional homeowners insurance. If any of these issues happen while living in your condo, your policy should pay for the repair of your unit. It may even include additional living expenses, which help you cover living expenses in case you can’t live in your condo while the repairs are being made.

Cost of condo insurance

The cost of your policy can vary greatly depending on a number of factors. To get the best condo insurance, don’t choose the first quote you see. Instead, compare quotes and options from several providers.

Extra coverage can also add to the cost. Consider the following add-ons you can include in your condo insurance policy. They might increase the price but might be worth it, depending on your circumstances.

  • Flood insurance: This may be required if you live in an area prone to floods. Even if it’s not required, you might want to get it if you think flooding could affect your home.
  • Umbrella liability: Liability insurance offers some financial protection in case you get sued.
  • Unit assessment: Sometimes an HOA can add on extra fees to all residents called an assessment to cover some type of loss. This extra policy reimburses you.
  • Water backup: This gives you coverage in case there’s some type of sewer backup in your condo, which isn’t otherwise covered in your condo insurance of HOA.

Not all of these options might be right for you, so think about your condo location and specific needs.

Best companies for condo insurance

Don’t be afraid to shop around for a competitive condo insurance plan. Get quotes from at least three providers. In addition to comparing annual premiums with coverage amounts, ask for any potential discounts offered as well. Bundling multiple policies, such as your condo and auto insurance, may help lower the cost. Updated plumbing and electrical systems within your condo may also lead to a better rate, as can installing a home security system.

When considering an insurance company, check out their online reviews and customer testimonials. You can also look up each one on the Better Business Bureau to get an idea of their reputations. Look at both the letter grade and any customer complaints and resolutions from the insurer.

How much condo insurance do I need?

To get an accurate condo insurance quote, you need to consider the condition of your home and the contents within. An insurance agent can help determine the value of your condo to make sure your policy covers enough without overpaying for coverage you don’t need.

Check your policy each year. As things age, their value decreases, so you may not need as much coverage. No insurance policy should remain static over time, and your condo policy is no exception to this rule.

Bottom line

Condo insurance is similar to homeowners insurance, but certain responsibilities are split between your individual policy and your HOA. As long as you understand those distinctions clearly, you can find condo coverage that is suited for your needs.

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