Insurance Facts for Condo Owners
Buying a condominium is a financial commitment that's worth protecting with insurance. Owners are responsible for pooling their resources to insure the condominium building and shared property, as well as for insuring their own personal condo units and property. Most major insurance companies offer products specially designed for condo owners, but getting the right coverage for the best price requires an understanding of how condo insurance works.
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HO-6 Basics
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HO-6 is the insurance industry's code for condo owners insurance. It shares certain characteristics with both the HO-1, HO-2, and HO-3 policies available to homeowners, as well as HO-5 insurance, which is for renters. HO-6 policies cover an individual condo owner's personal property from most common sources of damage, such as theft, vandalism, fire and wind storms. A typical HO-6 policy doesn't cover damage from earthquakes or floods, so if you live in an area where these are a realistic possibility, you may need to pay extra for hazard insurance.
Master Policy
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The master policy is the name of the insurance that your condo association buys to cover the building itself. As one of the owners, you already pay a portion of these insurance costs. However, a condo association's master policy has large gaps that you're responsible for closing with your own personal HO-6 policy.
While the master policy may cover the walls of your condo, it may not pay for wall coverings such as wallpaper or hanging art. Master policies typically don't pay for damage to your appliances, flooring or any other improvements that you've made to the unit since moving in.
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Limits
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Each condo owner's insurance policy has a set of limits that state how much the insurance company will pay in the event of a claim. Insurance companies may be able to provide an estimate or suggested coverage limit based on what similar owners in the same condo or region use. However, your limits should be set at the point where you wouldn't be able to afford replacing lost property. Adding up the value of your personal property and anything not covered by your condo association's master policy is a place to start. The higher your insurance limits, the more you'll pay in annual insurance premiums.
Lowering Costs
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You can take steps to control the cost of your condo insurance premiums. Short of lowering your limits, consider raising your deductible. This is the amount you'll need to pay before the insurance company begins to contribute. With a deductible of $1,000 you can still limit your liability, but also lower your premiums compared to a $500 or $250 deductible. Since risk factors play a part in determining insurance costs, you can keep your costs low by choosing a condo in a safe neighborhood or a condo that has modern safety features such as a security system and gated entry.
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