Although condos are purchased and not rented, condo owners won’t be able to purchase homeowners insurance for their property. Homeowners and condo insurance policies have several important distinctions that condo and homeowners need to know when considering properties they want to buy.
At the end of the day, condo and homeowners will generally have similar combinations of coverage, but how their policies work to provide that coverage differ greatly.
Table of Contents
How Condo and Homeowners Insurance Works
For homeowners insurance, most standard policies will include the following types of coverage:
- Dwelling Coverage, which covers damage to the structural components of the home, including walls, ceiling, roofing, plumbing, and HVAC systems, among other things.
- Personal Property Coverage, which covers the owner and household members in and away from the home up to a certain limit, usually around 10% of the dwelling coverage limit on the home.
- Personal Liability Coverage, which protects the homeowner or family members if someone is accidentally injured in the home and a household member is legally at fault.
- This can involve accidental falls, injury from a falling object, animal bites, or other incidents.
- Liability coverage also covers any legal costs that the homeowner incurs if they are sued.
- Standard policies have limits of $100,000, which can be increased.
- Medical Payments Coverage, which makes payments to reimburse any medical treatment costs of guests who suffer no-fault accidents on the insured property.
- Loss of Use Coverage, which covers any additional living expenses, such as housing or food costs, the household has due to the home being unlivable after a covered event named in the policy.
While condos can have the same coverage types, the policy structure works differently. Instead of all of these types of coverage coming from a single policy, the insurance is split into two policies: the condo association’s master policy and the condo insurance policies that individual condo owners hold.
How Condo Insurance Coverage is Divided
Condominium buildings have both communal property and individually-owned property. As a result, the condo association has to take responsibility for shared building components, and that responsibility includes having insurance.
Insurance for condos is split so that most of the structural coverage, which would be called dwelling coverage with homeowners insurance, is contained in the condo association’s master policy. The other coverage types mentioned previously will be included in individual condo insurance policies that each condo owner purchases.
Sometimes condo owners will need to purchase policies that cover some of the structural components and fixtures within their condo walls, but that depends on what type of master policy the condo association carries.
How Master Policies Determine the Condo Insurance Needed
For independently owned homes, each homeowner can choose a customized policy solely based on their coverage needs and preferences, while condo owners will need to modify their choices based on what policies the condo association carries.
Firstly, the condo association’s policy will have one of two types of reimbursement: full replacement cost or actual value cost. The former covers the structure of the condo building and any covered elements for the full cost to rebuild, replace or repair any items.
The latter option, the actual value cost reimbursement scheme, takes into account depreciation when determining how much to pay on a policyholder’s claim. Regardless of which one you might prefer, if you’re purchasing a condo and are shopping for a condo insurance policy, you’ll need to choose one that has the same reimbursement type as your condo association’s master policy.
Master Policy Coverage Stipulations for Single Condo-Units
Additionally, there are different types of master policies that impact what elements within individual condo-units are covered. If your condo association has a:
- “All-in” master policy, all of the structural components and fixtures within your condo’s walls will be covered. That includes, among other things, the:
- HVAC systems
- Flooring (usually only carpet)
- Interior condo walls
- Single entity master policy, the structural components and the original fixtures at the time of purchase will be covered.
- That means that any changes, upgrades, or repairs to the appliances, countertops, cabinetry, flooring, and other elements of the condo will not be covered.
- “Walls-in” master policy, the condo association’s policy only covers up to the outer walls of your condo.
- That means that, in addition to the fixtures and appliances not being covered, your interior walls, plumbing, and other internal structure won’t be covered.
Depending on how spare the included coverage for condo units in the master policy is, you’ll need to shop for or customize existing policies that offer complementary coverage and fill the gaps in the protection offered in the condo association’s insurance.