When purchasing home insurance for your condo or townhome, you need to be sure that you get a policy that adequately covers the cost to repair or rebuild your property. A standard homeowners policy will cover and reimburse the cost to fix damage to your home in the event of included, named perils such as fire, smoke, theft, vandalism, windstorms, and hail.
This type of coverage is known as hazard insurance, which covers the structure of your condo or townhome in the event of named perils included in your policy details. This coverage does not apply to any damage that results from homeowner’s negligence or poor maintenance nor will your insurer reimburse repair costs for natural disasters like earthquakes, floods, hurricanes, or tornadoes.
Whether or not it will be included in your home insurance policy depends on the type of ownership category your home falls under.
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Types of Ownership: Condos vs Townhomes
Generally speaking, all condos will belong to a condo or homeowners association that manages the building and other shared property used by condo or townhome owners. When that’s the case, some of the hazard coverage that protects these condo owners will come from a separate policy called a master policy.
Whether or not this applies to townhome owners depends on how they are owned. Townhomes, also known as townhouses or row houses, are multi-level properties that share walls with one or more other properties. Each is a distinct living space that has its own household and owners, unlike a duplex, which will have two living spaces but the whole building is one property.
Townhomes can be owned independently or as part of a condo association, depending on the neighborhood set up. If the townhome is independently owned, the owner would purchase a standard homeowners insurance, and hazard coverage would automatically be included. In contrast, condo insurance is not meant to include the main coverage for structural damage.
Instead, insurance carried by the condo association would usually be responsible for protecting the structural components of the shared building as well as the individual units, although, there are instances where an individual condo or townhome owner would need to carry additional home insurance coverage to make up for gaps in the condo association’s policy.
Of course, if you don’t own the property and rent either a condo or townhome, you will need to purchase renters insurance.
How Hazard Insurance Works in Condo Associations
Condo associations normally carry a type of insurance called a master policy that financially protects the structure of the building and the individual condos.
There are three types of master policies the condo or homeowners association may have:
- An “all-in” policy – Structural coverage that includes everything within the building (building materials like the roof, floors, etc.) and fixtures (appliances, countertops, and flooring) and individual condos but not the personal property or furniture belonging to condo owners
- A “walls-in” policy (also known as bare walls coverage) – Structural coverage that only extends to the walls of the condo and doesn’t cover anything within, including plumbing, fixtures, appliances, flooring, cabinets, or anything else
- A single entity policy – Structural coverage that extends to everything that was in the condo or townhome at the time of purchase, such as included appliances, flooring, cabinets, and other fixtures; doesn’t cover any updates or changes the owner may have made
If your condo or homeowners association has the minimum structural coverage in a “walls-in” policy, you will need to purchase complementary policy for your personal condo insurance that makes up for the coverage gaps that your HOA’s master policy leaves.
Many insurance companies that offer condo insurance policies will have customizable options that will allow you to get the right amount of coverage. Remember, your policy will need to match whichever reimbursement (full replacement cost vs actual value cost) type of policy your HOA uses, which will impact the final premium of your policy.