Putting a (figurative) safety net around the place where you and your family live with a homeowners insurance policy is an essential responsibility of property ownership.
Even if it isn’t required as a condition of a mortgage when you first buy a house, as is sometimes the case, this coverage is still worth pursuing.
It’s no less valuable, in its way than reinforcing your roof and walls or siding with stronger, more weather-resistant materials or adding burglar alarms and carbon monoxide detectors.
The assurances that homeowners insurance can provide you with are by no means withheld to you if, perchance, you don’t own a “house” in the most conventional sense of the term.
Companies in the contemporary insurance business, both major nationwide players and smaller regional or local firms, sell policies suitable for houses, condominiums, mobile homes, and various other types of property.
These all serve the same essential purpose: protecting you from unbearable expenses in the wake of fires, storms and other extreme weather as well as theft, vandalism or other circumstances stemming from human malice.
With that said, owners of new condominiums, co-ops or apartments will need to understand the distinct differences that exist between certain policy types. They may notably affect your living experience, especially if you plan on staying there for the foreseeable future.
4 Differences Between Homeowners and Condo Insurance
For the most part, homeowners insurance and condo insurance policies are the same.
But the ways in which they do differ are significant enough to warrant being detailed here, so be sure to look them over carefully:
#1. Your Condo Policy Is Separate From The Building Policy
If you purchase an HO-6 homeowners insurance policy to cover your condo, co-op or apartment, be aware that it only covers the parts of the dwelling you own. So if your new property came with furniture provided by the building owner, it isn’t yours, and any damage befalling it wouldn’t fall under the umbrella of your policy.
It may, however, fall under the building’s policy, though you’d be more likely to have ownership cover the repair of a toilet, stove or other fixed appliance. The owner holds a separate “master policy” that applies to the entire structure (or group thereof, in the case of a large housing development).
By contrast, any fixed furniture or appliances you were to add, such as a new set of kitchen cabinets, would be considered your possessions and therefore could only be covered by your condo insurance policy.
#2. Water Damage Is A Complicated Matter
A reasonable number of homeowners insurance policies don’t cover water damage at all, which means their holders must purchase add-ons to avoid being stuck up the proverbial creek without a paddle in the event of water overflowing.
With condo insurance, it can be somewhat complicated. Water damage resulting from a burst pipe, or the dwelling’s automatic fire protection sprinklers installed in your ceiling, is covered no matter what, either by the building’s master policy or your individual coverage plan. But something like underground water overflow, stemming from a sewer backup or sump pump, might not be within the realm of covered losses for a condo insurance policy.
You might have to purchase a rider similar to those that owners of conventional homes would buy if you live in an area where underground water has been known to overflow and make its way into condos and apartments.
Consider talking to your new neighbors, as you’ll likely be doing so anyway, about this issue, asking if they’ve heard of anything like that happening in your building or development.
#3. The Prices Of These Policies Are Much Lower
According to TrustedChoice, a group of independent insurance agents unaffiliated with any particular company, the average cost of condo insurance falls somewhere between $100 and $400.
This is well below the average premium cost associated with a full-blown homeowners insurance policy, $1,192 as of 2016, according to data compiled by the National Association of Insurance Commissioners. It’s a steal compared to the average premiums in states where natural disasters are common, such as Louisiana, Florida, Oklahoma, and Kansas; those can be anywhere from $1,500 to $2,000 or even more.
Condo insurance costs are determined by factors including your location, the level of coverage assumed by the building owner or homeowner’s association responsible for the development, your deductible amount, any add-ons you beef up your policy with, and the materials used to construct the unit.
On the other hand, you also need to recognize that condo insurance costs less because it doesn’t cover the parts of the apartment or condo that existed before your arrival. (It’s also less because it applies to a space with less square footage, but that’s less relevant.)
You need to make sure that the building’s master policy is in place to cover hazards outside the realm of your responsibility.
#4. You Need To Stay On Good Terms With The HOA
As the owner of a conventional house, you’re only beholden to your insurance provider (and, to a lesser extent, your lender if you’re a mortgage-assisted buyer like many Americans are) when it comes to damages you wish to claim as losses.
It’s a little bit different as a condo, apartment, or co-op owner with an HO-6 insurance policy. Due to all of the circumstances described above, you’ll deal with leaders of the HOA or the building’s owner on a semi-regular basis, or both, if the building or development’s owner is part of the HOA.
As a result, it’s important that you remain on good terms with the organization and the individuals primarily involved in it. You also have to observe the various conditions of the HOA’s by-laws, just as you would if involved in any other association.
Doing so may include observing certain conduct-related stipulations (no loud parties, under-the-table sublets, and so on) as well as paying periodic dues or pitching in to pay for repairs to the common area, like a fire in the building lobby. (In the latter case, the III suggested purchasing a “unit assessment” rider for your condo insurance that reimburses you for any payments.)
In conclusion, any other sensible practices you’d usually apply to purchase insurance, including shopping around with multiple providers, researching as much as possible in-person and online, and being mindful of state and local laws, can help you with the search for condo insurance.
A Taxonomy of Modern Dwelling Coverage Types
As a new or prospective homeowner, there are five classes of insurance from which you can choose. These are as follows:
- HO-1 Policy: Considered something of a bare-bones policy, this coverage only applies to losses stemming from fire and lighting, windstorms and hail, explosions, riots or civil unrest, damage caused by aircraft or vehicles, smoke, vandalism or mischief, theft, and volcanic eruptions. According to the Insurance Information Institute, many states don’t permit this policy type to be sold anymore, but it hasn’t fully disappeared from the U.S. market.
- HO-2 Policy: This coverage plan applies to all risks listed above as well as falling objects, damage from the weight of ice, snow, or sleet accumulation on the roof, all common varieties of water overflow damage, sudden fires or freezing of heating and cooling systems, and electric shock or damage stemming from artificially generated current.
- HO-3 Policy: With this policy type you’re insured against all risks covered by the two previously mentioned policies, as well as what the III refers to as a broad provision for “all [other] perils” aside from floods, earthquakes, wars, landslides, mudslides, nuclear accidents, and any other circumstances specifically denoted as non-covered in the policy agreement.
- HO-6 Policy: The most important coverage variety for you as a condo, co-op or apartment owner to understand, this protects the parts of the dwelling you own and all associated contents from all hazards in HO-1 and HO-2.
- HO-8 Policy: Owners of older homes may only be able to purchase this policy, which compensates you for the actual cash value of the property minus cost depreciation for damage stemming from all disasters covered by an HO-1 plan.
Keep in mind that your insurance company can and will add other exclusions to your policy at its discretion. Be sure to discuss the details of your coverage plan in comprehensive and exhaustive detail with the agent who sells it to you, along with anyone else in the company who may be worth querying.
You don’t want to be caught unaware after the fact and not be covered for an incident you thought you had protection for.