The purchase of a condo is just as exciting as the purchase of a house. You own your own property with the added benefit of common areas, extra amenity access, reserved parking, and outside maintenance. What you also end up with is a very unique insurance need.
Understanding the HO-6 Policy
When you purchase a condo policy (HO-6), you are only purchasing a specific part of the building where your unit is located. For the purposes of an insurance policy, you are responsible for covering everything “from the walls in.” In other words, the drywall (interior walls) and anything attached to it inside your unit is your responsibility while everything from the studs outside your unit and throughout the rest of the building is the responsibility of the condo association. The dwelling portion of your policy will cover the aforementioned portions of your physical condo much the same way a homeowners insurance policy would cover a standalone dwelling.
Your condo policy (HO-6) will also provide protection for your personal property – or the things you can pick up and move. This includes your furniture, electronics, clothing, and just about anything else you own that the policy does not formally exclude.
Loss of use coverage comes into play when your home is damaged and becomes unlivable. This coverage will pay for you to stay elsewhere while your home is being repaired. The limit is usually about 40% of your personal property limit.
Finally, your policy will include personal liability and medical payments coverage. Medical payments coverage will help to pay the medical bills of someone who is injured while in your condo. This is a good-faith type of coverage that is designed to cover small bills without filing a claim against your personal liability coverage. A personally generally has to sue you in order to access the personal liability limit on your policy.
You’ll need to talk to your insurance agent to discuss the amount of coverage you need for each of the above portions of your policy. Underinsuring could leave you in a bind if you have a major loss, but overestimating your needs will only result in higher premiums for coverage you don’t actually qualify for.
Finally, make you get a copy of your condo association’s master policy each year. The master policy is something you’ll be paying for with your condo association fees and it covers the remainder of the building and liability for the common areas.
Talk to your real estate agent and mortgage broker about whether or not your condo insurance premiums can, should, or need to be rolled into your mortgage payment. It may or may not be required, at least for the first few years of your mortgage.