As a condo owner, your condominium complex’s master policy does provide some insurance coverage for the common areas, and liability claims for mishaps that are likely to occur in these areas. However, there may be huge discrepancies in what is covered by a master policy in one complex compared to the next one. To ensure that your unit and possessions are adequately insured, you need to understand what the master policy covers and what it doesn’t cover. Once you understand this, you can purchase a condo unit owner’s policy that will cover the gaps in between.
So let’s take a look at how to insure your condo below.
The Individual Condo Insurance
As a single-family homeowner, you are solely responsible for the entire structure and its contents. The standard home owner’s insurance policy covers several hazards including:
- Interior and exterior damage to structure and possessions caused by vehicles, aircraft, explosions, hail, windstorms, lightning, smoke and fire
- Damage caused by thawing ice
- Personal liability for injuries within your property
- Personal belongings theft
- Vandalism
- Loss of use, when you are forced to live elsewhere while repairs are done to your home
In contrast, as a renter, you are not financially responsible for the building. Traditionally, you are not even responsible for fixtures in your unit. If a fire destroys the building, you are not expected to purchase new bathroom fixtures or kitchen cabinets. Renters insurance covers clothing, furniture and other personal possessions, but it also offers protection against other perils under homeowners insurance including personal liability and loss of use.
Condo insurance does cover personal liability and loss of use as well. The difference between condo insurance and renters insurance is that with condo insurance you are responsible for some of the interior components in your unit, but it depends on your building’s master policy stipulations. Condo insurance differs from homeowners insurance in that you are not responsible for structural components; these instead are covered by your condo association’s master policy. However, the policy may vary from one condo complex to the next, so make sure you read through it before purchasing, even when moving from one condo to another.
What is covered by the condo master policy?
You are most likely paying a monthly homeowners association (HOA) fee as a condo owner. Part of the fee goes towards purchasing the master policy, which insures against physical damage to the common areas in the complex and personal liability claims due to accidents that occur in the common areas.
Common areas are those parts of your building that you share ownership with other condo owners like swimming pools, community rooms, athletic facilities, community landscaping, elevators, lobbies and hallways. The master policy also covers exterior walls, roofing and other exterior structures.
The condo master policy also covers the same perils as those referred to in homeowners insurance, including building collapse, fire, hail and explosions. The amount you pay for the coverage depends on the same factors that affect homeowners’ and renters’ insurance rates, including:
- Age of the building
- Construction type
- Size of the building
- Location
- Presence of loss-mitigation features like a sprinkler system for fires
One exception: If you are determined as being responsible for damage to a common area by your homeowners association, you will be held personally responsible instead of filing a claim under the master policy. To protect against this, purchase “loss-assessment” coverage. This coverage is necessary if your complex experiences loss exceeding the master policy’s limits and your HOA requires that unit owners cover the shortfall.
What is NOT covered by the condo master policy?
A condo unit-owner policy helps insure specific components within your unit. These include:
- Damage to ceiling, floor and wall coverings
- Damage to unit fixtures
- Damage to any alterations and improvement you have made
- Damage to structures that are permanently attached, like a garage
If the entire building complex were to burn down, the condo’s master policy would pay for the rebuilding of the common areas and your condo, but you will have to pay for the replacement of your hardwood floors, cabinets, toilet and countertops. This is why you need to afford yourself some protection using a condo unit-owners policy. Some master policies cover perils like these, which is why you should carefully read the policy before you either over or under purchase insurance. Some master policies may cover some interior items, but only at a basic level, which means if your original flooring was vinyl and you upgraded it to ceramic tile, the master policy will only replace the vinyl.
The Bottom Line
When you browse homeowners insurance for condos on websites, you should be aware that it is different from the typical homeowners and renters insurance in the way the responsibility for certain interior components and building structure is handled. Ensure that between your complex’s master policy and your condo unit owner policy, you are fully protected and never over-insured. Have a copy of the master policy before you purchase the condo unit policy to ensure that you are fully insured from day one. Remember, it’s never too late to get your coverage updated.
