Your condo is more than a roof over your head: It's your home. So make sure you understand insurance basics and coverage options for your unit.
Most mortgage lenders require proof of condo unitowners insurance before they approve a purchase. If you're in the market for a condo unit, contact an insurance representative right away to get the process started.
Your condo unitowner policy's price, or premiums, depends on the amount of coverage, the deductible (the cost the policyholder must pay before insurance payments begin), and any applicable discounts and charges. Less coverage and a high deductible mean lower premiums. More coverage and a low deductible mean higher premiums. A knowledgeable insurance agent can help you find the right balance for your home and family.
Master policy and unit policy
Generally, a condo association insures the building and common elements under a single policy, called the master policy. This policy typically provides one of three kinds of coverage:
- The basic building (walls, roof, floors, elevators), but not unit items (such as appliances, carpeting, cabinets, wall coverings) and in some cases not interior walls
- The basic building and unit items, but not unit additions, alterations, or improvements made by you at your expense
- The basic building and unit items, including additions, alterations, and improvements
When a master policy is in place, you will need to purchase an individual policy to cover the items and changes in your unit not covered by the association master policy, including your personal property, personal liability and assessments made against all members of the Association. You may also want to consider coverage for damage to your unit not compensated because of the master policy deductible.
Keep in mind that unit owner insurance responsibilities can vary widely. For example, some associations may have no master policy, which shifts the responsibility for insuring the structure to the unit owners. Review your building's insurance documents and bylaws with a qualified agent early in the purchasing process to make sure you comply with all requirements and purchase adequate coverage for your home.
Other unit policy coverages
A typical condo unitowner policy also includes coverage for several other common items and situations:
- Personal property: In most cases, condo unitowners are responsible for insuring their possessions against theft, damage, or loss. Personal property coverage insures your clothes, furniture, electronic equipment, and other household items for their replacement value or their actual cash value (original price minus depreciation). Your property is usually covered whether it is in the unit or you have it with you when you are away from home.
- Loss of use: This coverage applies if you temporarily have to live elsewhere because your condo was made uninhabitable by a fire or other covered peril. The policy will reimburse you for the portion of hotel bills, meals, laundry, and other living expenses that exceed what you would pay if you were living in your home.
- Personal liability: Liability coverage protects you if others make a claim or bring suit against you for physical injuries, bodily injury or property damage for which you are responsible. It also provides protection if you or a family member causes damage to others' property. Some policies will pay for defense and court costs, in addition to settlement costs.