Individual Condo Insurance: Not Like Homeowners’ or Renters’ Insurance
When you own a single-family home, you alone are financially responsible for the entire structure and all of its contents. For this reason, a homeowners’ insurance policy typically covers the following hazards and more:
- Exterior and interior damage to the structure and your possessions caused by fire, smoke, lightning, windstorms, hail, explosions, aircraft and vehicles;
- Theft of personal belongings;
- Damage from thawing ice;
- Personal liability for injuries that occur on your property; and
- Loss of use, if you have to pay to live somewhere else while your damaged home is repaired.
By contrast, as a renter, you have no financial responsibility for the building itself. In most cases, you aren’t even responsible for the components within your unit. If a fire destroys the building, you won’t be expected to purchase new kitchen cabinets. Renters’ insurance usually only covers personal possessions, such as furniture and clothing, but it protects those belongings from damage caused by the same perils that homeowners’ insurance covers. Also like homeowners’ insurance, renters’ insurance covers loss of use and personal liability.
Condo insurance covers loss of use and personal liability too. Where condo insurance differs from renters’ insurance is that you may be responsible for some of your unit’s interior components, depending on what the building’s master policy states. And where it differs from homeowners’ insurance is that you won’t be responsible for many structural components; the condo association’s master policy will cover them. This policy can vary from one condo association to the next, so it’s important to read it before you buy, even if you’re just moving from one condo to another.
What the Condo Master Policy Typically Covers
Part of the monthly homeowners association (HOA) dues you pay as a condo owner goes toward purchasing a master policy that insures against both personal-liability claims caused by accidents in common areas and physical damage to the complex’s common areas. Common areas are the parts of the building that you share ownership of with other condo-unit owners, such as hallways, lobbies, elevators, community landscaping, athletic facilities, community rooms and swimming pools. A master policy also covers the exterior structure – for example, roofing and exterior walls.
Condo master policies cover the same types of perils that homeowners’ insurance covers, including fire, lightning, windstorms, hail, explosions, smoke, theft, vandalism, falling objects and building collapse.
How much you’ll pay for this coverage depends on the same factors that affect what you’d pay for homeowners’ and renters’ insurance, including building age, claims history, building size, location and construction type, and such loss-mitigation features as a sprinkler system for fires.
One exception to watch: If your homeowners’ association determines that you are responsible for damaging a common area, it can hold you personally responsible rather than filing a claim under the master policy. You can purchase what is called “loss-assessment coverage” to protect yourself against this possibility. Loss-assessment coverage is also useful if the complex experiences a loss that exceeds the master policy’s insurance limits, and the HOA has to hand down a special assessment forcing unit owners to cover the shortfall.