What Does a Condo Insurance Master Policy Cover?
Owning a condominium unit has its advantages. There is a homeowners association (HOA) that takes care of many items that most single-family home buyers have to do themselves. For a fee that is dependent on how many units are sold and the amenities offered, you don't have to worry about paying for the landscaper, pool cleaner or hazard insurance on the building by yourself. However, the master policy insurance carried by the HOA for the structures on the property usually does not have the coverage that you need to be fully protected.
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Purpose
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Since it may be difficult to separate the exact ownership on items such as the roof, walls, corridors, parking lots, gardens, fences and other common areas, the HOA carries a master policy that covers these in case of damage or total loss. Each homeowner pays a share of this insurance through their HOA monthly dues. Some HOA covenants, conditions and restrictions--or CC&Rs, as they are commonly called--specify the common areas that are shared by a few of the residents, such as patios, and those that may be accessed by anyone living in the development, such as a laundry room. The HOA master policy should cover all common areas, regardless of how many homeowners use them.
Bare Walls-In
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A bare walls-in policy is one type that an HOA may carry on the common areas of the condo complex. This coverage is for the exterior through to the interior of the walls of your unit. It also may cover that which is in the walls, such as plumbing and electrical. For example, if a flood damages the outside walls of the development and seeps through to your flooring, you will not receive reimbursement for the repairs inside your unit from the holder of the master policy. Only the common structures of the walls and what's inside of them will be repaired.
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All-In
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An all-in master policy will pay for damage to more than the bare walls-in coverage but still will not fully cover all aspects of the inside of your unit. Some items inside the walls, such as your floors and ceilings, may be paid for in a loss by all-in coverage, according to Bankrate.com. Also, if you have made improvements to the inside of your unit, you may be able to recover a portion of the repair. However, this master policy, just as that for the bare walls-in, does not cover any personal belongings of yours that are damaged or completely destroyed.
Considerations
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Condo master policies may have a deductible, which will be divided among the number of owners in case of a loss. Each master policy covers different items and has varying levels of deductibles, so it's best to read the declarations page before you purchase a condo. According to the Bankrate.com article "6 Condo Insurance Questions," deductibles can be as high as $50,000, which can be a financial burden on an owner.
To protect your personal belongings that are not covered under the master policy, you should buy HO-6 insurance coverage. First find out what your HOA policy covers; then determine the value of what you own outside of that. It's a good idea to buy replacement cost coverage so that your items are reimbursed at today's values. You should also make sure your policy has coverage for the housing that you will need if you are not able to use your condo while it is being repaired.
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