5 FAQs about Condominium Insurance
If you decide you’d like to buy a condominium, you’ll probably need to purchase condo insurance, too. So, as a condo buyer, what do you need to know about this unique type of homeowners insurance policy?
1. What is condo insurance?
Condominium buyers share in a unique type of property ownership. Each condo unit is owned individually, but those individuals also collectively share the ownership of the building, the grounds, and any shared amenities.
Typically, a condominium owners association purchases a master policy to insure the building and common areas, and the cost of that policy is included in homeowners’ monthly dues.
However, if losses occur inside your unit, the building’s policy probably won’t cover it. You’ll need condo insurance to protect your personal property and your home’s cabinets, flooring, and fixtures from disastrous events such as fire, theft, wind, or water damage.
2. Is condo insurance required?
It depends on how you intend to pay for your condo. If you plan to finance your purchase with a mortgage, expect your lender to require condo insurance. (Similarly, lenders typically require buyers of single-family homes to have homeowners insurance.)
On the other hand, condo insurance won’t be required if you’re a cash buyer. However, you may decide to purchase coverage anyway to protect your investment.
3. How is condo insurance different from homeowner’s insurance?
The main difference between the two types of insurance is the amount of protection provided. Homeowners typically need broader coverage since they are responsible for all aspects of their property, including the land, its structures, and any injuries to visitors that might occur.
The insurance industry uses the code HO-6 to categorize various types of condominium insurance policies. On the other hand, homeowners’ insurance policies fall under category HO-3.
4. Are there different types of condo insurance?
Yes, there are numerous types of policies offering various degrees of protection. For example, personal property coverage will replace items stolen or damaged in a covered event. But what, exactly, is a covered event?
Read the details to make sure you have the coverage you desire. For instance, water damage from a leaking pipe is often covered, but water damage from flooding or stormwater backups is not.
Some condo insurance policies go beyond personal property and will take care of your expenses if you need to move out while repairs are being made. Or, a policy may cover a guest’s medical bills if they’re injured in your unit.
5. How much does condo insurance cost?
Condo insurance premiums can vary substantially, depending on your location, the age of the building, the size of your unit, and how much coverage you need. Your credit score can also impact the cost.
To save, be sure to shop around and look for discounts. Increasing your deductible is another way to reduce your premiums. Also, ask your Accredited Buyer’s Representative if they can recommend insurance providers that other condo buyers have used successfully.