For people living in these communities, there are typically two insurance policies that cover different parts of their living space. One is an insurance policy the owner buys, sometimes referred to as an HO-6 policy. Owner dues cover the other, often referred to as a community master policy, which provides coverage for certain losses to the community.
These two policies work in tandem to cover losses inside and outside an owner's individual unit.
What a standard condo policy (HO-6) includes
Condo insurance is normally a special package that combines different coverages to protect a condo unit’s owner from losses. If you’re shopping for condo insurance, ask your agent or broker about these coverages:
- Structure/Dwelling: Covers your personal unit based on the community's governing documents.
- Personal liability: Protects against claims someone else makes against you.
- Premises medical coverage: Pays the medical expenses of others accidentally injured on the property you own.
- Additional living expense: Pays for your cost to stay somewhere else temporarily if the living space you own is deemed unlivable due to a covered claim.
- Personal property (contents) coverage: The loss of valuable personal property, such as gold or jewelry, may exceed the standard condo coverage limits of your condo policy. Most have a specific dollar amount that the policy covers, and it’s often based on actual cash value at the time of loss, not the full replacement value. If you have expensive jewelry, heirlooms or other similar items, you should talk to your agent about an endorsement to the policy that offers replacement cost coverage and/or increased limits to some of the specific dollar limits.
- Loss assessment: This coverage may help you pay for special assessments the association charges its members for losses the community sustained. For example, wind damage to the roofs of several units may exceed the coverage limits of the community master policy, and a special assessment may be charged to unit owners to cover the remainder of the damage. Loss assessment coverage can prevent you from paying out of pocket in situations like this. Keep in mind that if the cause of the damage is covered under your unit owner’s policy, then the loss assessment for that cause will also be covered.
Understand the coverage noted in your community governing documents
The coverage for the structure of the individual condo unit is based on the community's governing documents.
Coverage under the community master policy typically falls into one of these categories:
All-in
The community master policy covers the exterior and all interior finishes, such as doors, windows, siding, shower/tub, vanity/cabinets, paint, baseboards/trim, light fixtures, and floor coverings. Unit owners are responsible for the master policy deductible on their insurance policy.
All-in, excluding improvements or betterments
The community covers the unit to its original interior and exterior finishes and does not cover any changes or upgrades from the owner. Examples of owner changes or upgrades could include changing out the original laminate countertops for granite or replacing the original carpet floor with tile. It could also include repairs to a skylight added by a previous owner of the unit. Unit owners are responsible for the community deductible and the costs to repair any items changed from the unit’s original finishes using their own condo policy.
Bare walls or walls out
The community covers damages up to the uncovered sheetrock and subfloor — anything that could occur outside your owned unit. This includes the roof, maybe the windows, fencing, carpet in the hallway of a condo complex, and other common areas. Unit owners are responsible for the community deductible and all interior finishes, which include shower/tub, vanity/cabinets, paint, baseboards/trim, light fixtures, and floor coverings.
If you’re uncertain what your community's governing documents cover, speak with the president or the property manager. Each year when the community policy renews, unit owners receive a Certificate of Insurance, which confirms the limits and the deductible of the community's insurance policy.
Insurance rates for these communities have gone up significantly since 2019. However, the increased rates are going toward covering the community’s insurance and providing them with money to do things like upgrades and repairs.
What condo insurance doesn't cover
It doesn’t cover:
- Community property.
- Flood or earth movement.
- Wear and tear or maintenance items.
Many policies are written based on a specific type of damage or loss that’s stated by name in your policy. Check with your insurance agent or company to understand what your policy is designed to cover.