The structural components of your condo and the property within are covered by two types of policies: a master policy purchased by your condo association and the individual condo insurance that you choose to purchase. When you purchase a condo, your mortgage lender will require you to obtain a condo insurance policy that complements the master policy for your building.
Unfortunately, neither of these policies will include earthquake insurance, which is usually a named exclusion in standard home insurance policies, but if you live in an area where earthquakes are a common risk, you need to make sure that you’re covered.
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How to Get Earthquake Coverage
To make sure that your condo is fully protected in case of an emergency, both you and your condo association will need to purchase a separate earthquake insurance policy, in the form of condo insurance and a master policy, respectively.
The condo association’s earthquake insurance master policy will include coverage for damage to the building’s and all condos’ structural components, as well as possibly any inner plumbing, fixtures, flooring, and appliances, depending on the type of master policy your condo association carries, “all-in,” “walls-in,” or single entity coverage.
Your personal condo-unit earthquake insurance policy will then provide the protection you need. If your condo association’s master policy doesn’t extend past the outer walls of your condo, you’ll need to get an earthquake insurance policy with building property coverage to replace or rebuild any damage to interior walls, fixtures, appliances, windows, flooring, and cabinetry.
You can also purchase other optional coverages, including:
- Personal Property
- Loss of Use
- Loss Assessment
For California residents, both master and single condo-unit policies can be purchased through the California Earthquake Authority.
What to Do if Your Condo Association Doesn’t Have Earthquake Insurance
Although lenders will ask borrowers to carry basic condo insurance before closing the loan, often, they won’t require you to carry earthquake insurance, even if you purchase a condo in an area with high-risk of earthquakes.
As a result, many people don’t think about how much earthquake insurance can help them protect their assets and their homes before it’s too late, and many condo associations don’t have rules about having to carry earthquake insurance to protect the building, shared spaces, or exterior structures of each condo.
In the past, earthquake insurance has been prohibitively expensive, but, in California, the CEA has made these policies more affordable for condo owners. Ideally, your condo association would take care of also carrying these policies, but regardless of if they do, you need to carefully consider the financial costs of either carrying or not carrying a policy in the event an earthquake does damage your building and condo.
In the event a large earthquake does occur, the Federal Emergency Management Agency will only cover earthquake damage in some cases, and FEMA’s budget is limited in terms of covering temporary housing and financial assistance to affected homeowners. Additionally, if you are even eligible to receive the money at all, the government aid isn’t freely given. These funds are loans that will eventually have to be repaid.
How to Reduce the Cost of Your Home Insurance
After deciding to purchase additional hazard insurance for your condo or townhome as needed, you might be concerned about how expensive the overall cost of your home insurance policies will be. Fortunately, there are a few ways that you can get discounts on your premium from most insurers.
Often home insurance companies will offer discounts for certain actions that reduce the risk of damage to your home. These can include efforts to weatherproof your home, like adding or repairing storm shutters, or safety measures that deter theft or vandalism, like security systems, and/or outdoor lighting.
You can also reduce your premium by agreeing to take a higher deductible if you have to make a claim, or you can sign up for an annual payment rather than a monthly payment. For homeowners who pay their home insurance premium as part of their monthly escrow payment, their lender likely pays the lump sum premium for them, allowing them to keep cash on hand while enjoying the benefit of the discount.