House Vs. Townhome Insurance

With many townhouses, each owner is responsible for his own structure.
With many townhouses, each owner is responsible for his own structure. (Image: Hemera Technologies/ Images)

Townhouse insurance can be tough to figure out. If you own a townhouse, you share certain elements in common with condominiums and with traditional single-family homes, and the extent to which your home shares these elements determines the kind of insurance coverage you need. If you don't identify these elements correctly, you could buy the wrong type of policy.

Standard Homeowner's Insurance

Many homeowners fully own the property on which their homes are built as well as the homes themselves. Standard homeowner's insurance fits this situation by offering protection for the main and secondary structures on the property and the contents inside the home. Additionally, standard policies come with liability insurance that protects the homeowner against financial loss from lawsuits arising from injuries and damages that occur on or off his property for which he is legally liable.

Townhomes With Collective Property Coverage

It is rare, but some townhouse complexes have shared property like condominiums. In these cases, a homeowners' association owns the structures of each townhouse and the individual owners are only responsible for the belongings inside. Townhouse insurance coverage can act like condo insurance by only covering an owner's contents and liability. Because the association owns the structures, they are protected by the association's master insurance policy and do not need to be protected by individual policies.

Townhomes With Individual Ownership

Many townhouse complexes allow each owner to own her own structure. In these cases, the homeowners' association only covers shared property like walkways, gazebos and pools. Every owner is responsible for protecting her own home as well as the contents inside. Standard homeowner's insurance is appropriate for these situations because the owners need individual coverage for their homes. However, because there is an association, the policies may need additional coverage to fully protect the owners.

Loss Assessment

Whether the structure of your townhouse is owned by you or your homeowners' association, you face a risk that traditional single-family homeowners do not. The association may face losses that are not covered by its insurance policy, often due to inadequate coverage. If the association faces a $3 million judgment, for example, and its policy only covers $2 million, the remaining $1 million will likely get assessed among the members of the association. Townhouse insurance can usually be endorsed with loss assessment coverage that allows the insurance company to pay these assessments on your behalf.

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