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What’s The Difference Between Condo and Homeowners Insurance?

What’s The Difference Between Condo and Homeowners Insurance?

If you live in a condo or are considering moving to one, you might be wondering about homeowner’s insurance and how it applies to condo units. Do condo dwellers require homeowner’s insurance, or is there a special type of insurance exclusively for condominiums?

Though the general principles are the same, the distinction is in what you need to insure. While homeowners must protect their entire property, including the house, condo owners are typically only concerned with what’s inside the unit and not part of the common property. Everything outside a condo unit’s walls is covered by the HOA’s insurance—which owners pay through their monthly fees but aren’t responsible for it individually.

With all that in mind, condo owners must still consider various aspects of a policy beyond the dwelling itself. Liability, loss coverage, and personal property protection must still be included.

Today, we’ll discuss the finer points of condo insurance vs. homeowner’s insurance to illustrate the differences and highlight areas of importance before you establish your policy.

What is an H06 Policy?

H06 insurance is a term used interchangeably with “condo insurance.” It’s a policy specific to condo owners as it addresses their unique coverage needs for liability, contents, loss of use, and various other things.

You might also come across H03 policies. An H03 policy is more specific to single-family homes and covers the entire physical structure, whereas the H06 focuses on the contents and inside structure. Other types of homeowner’s insurance exist, but H06 is the most relevant to condo owners.

Here are some of the features of an H06 condo insurance policy and how they differ from traditional homeowner’s insurance.

Dwelling Coverage

Dwelling coverage in an H06 policy covers the inside structure of the condo unit and any built-in features. These can include built-in appliances, shelving, and other improvements made over time. The amount of coverage needed will also depend on the HOA’s master policy and what it covers.

In a homeowner’s policy, the required dwelling coverage would depend on the cost of rebuilding the home.

Loss Assessment

Loss assessment coverage is an add-on to an H06 policy and only applies to homeowners within a community, i.e., where some of the property and its ownership are shared with others. Loss assessment covers perils and accidents that happen in shared areas of the community, like stairwells, clubhouses, pools, etc.

While the HOA’s master policy also covers loss assessment, there are limits to what it will pay. Additional coverage gives you flexibility if damages exceed the master policy’s limits. Your policy may also pay for special assessments occasionally levied by the HOA.

Liability Coverage

Liability coverage protects you in case anyone is injured on your property. The scope of liability insurance is pretty much the same for condo owners and homeowners. Still, a homeowner’s policy must cover the entire property, inside and out, while condo liability only needs to cover what happens inside the unit.

Loss of Use

Loss of use coverage protects you in case your unit is uninhabitable due to a covered peril and will reimburse you for related expenses, such as temporary housing and meals, as deemed appropriate and necessary. The subtext here implies that you’d be compensated for reasonably-priced digs—not a penthouse suite with a private chef.

The same coverage in a non-condo homeowner’s policy would likely have preset limits based on a percentage of the amount of dwelling coverage. For example, if the dwelling coverage is $250,000 and the limit is 30%, the homeowner would be covered for loss of use expenses up to $75,000.

Personal Property

Personal property coverage provides coverage for belongings against damage and theft. Essentially, this part of a policy is virtually the same for both condo and homeowner’s insurance. Since the HOA master policy does not cover your personal property, this feature is essential to your condo owner’s insurance policy.

Check your policy’s liability limits to ensure you have enough coverage to replace your valuables, including furniture, clothing, computer equipment, electronics, etc., as the standard coverage may not be sufficient for fine art, musical instruments, antiques, jewelry, or other high-value items. The amount of personal property coverage can be upgraded to suit your needs.

Deductibles

All insurance policies have deductibles—the amount you’re expected to pay before your coverage kicks in. In most cases, you can choose your deductible to suit your budget. A higher deductible will bring your premiums down, while a lower deductible will mean your monthly payments will be much higher. Be sure to consider what you’d be able to comfortably pay if you had to make a claim and weigh that against your budget.

Do Mortgage Companies Require Condo Insurance?

Unlike traditional homeowner’s insurance, condo insurance is not always required to obtain a mortgage for a condo purchase. The HOA, however, is another story. Most homeowner’s associations require members to hold condo insurance as it protects them, their unit, and the rest of the community from loss and liability. It is always in a condo owner’s best interests to thoroughly understand what their policy does and does not cover and the limits to coverage for every feature and covered peril.

So, to recap, condo insurance covers:

  • Interior structures
  • Built-ins (appliances, architectural features, shelving, upgrades)
  • Personal belongings
  • Liability for injury inside the unit
  • Liability for injuries in common or shared areas
  • Coverage for living expenses while the unit is uninhabitable because of a covered peril
  • Special assessments (in some cases)

We recommend that all condo owners review their policy yearly to ensure they have adequate coverage for any anticipated peril and the deductible still meets their needs. A solid insurance policy provides peace of mind, helping you take care of business when the unexpected happens so you can focus on getting back on your feet.

If you have any questions about condo insurance, HOA master policies, and related coverage for your unit, don’t hesitate to reach out.

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