There are several types of structures that people call home. Houses have always been popular, but condos are attracting the attention of more people in recent years. Both can provide a home, but the two have different characteristics and require different coverage.
A standard Homeowner's insurance policy provides coverage for the house, related structures, personal property, and liability. A Condo Owner's insurance policy (Homeowners Form HO-6) features some of the same coverages. It provides coverage for personal property and liability. The coverage for the actual building is where these two policies differ the most.
Condos will often have an association that coordinates certain details relating to the condo, such as the management of the condo, including the purchase of insurance on behalf of the unit owners. This insurance policy covers all common grounds that are shared by the owners. Typically, the association is also responsible for the exterior of the building.
When it comes to insuring a condo, it is important for the condo owner to know what the association's policy insures, so they know what they are personally responsible for covering. The condominium declaration or master deed includes a section on insurance requirements or association bylaws. This section will describe what insurance the association will purchase on behalf of the insured. Any property not insured by the association is the responsibility of the unit owner. There are two typical ways the association will insure the real property: "bare walls" coverage or "as built" coverage. Bare walls coverage means that the unit owner is responsible for insuring all real property and fixtures from the unit's exterior framing inward. For as built coverage, the unit owner is responsible for insuring the upgrades or additions. Since coverage varies by association it is important to review the details in the association's master agreement.
The unit owner is also responsible for insuring their personal property in the unit they own, like furniture, clothing, etc. It is generally up to the homeowner to choose a limit for this coverage.
Most associations now have $10,000 - $50,000 deductibles for which the condo owner is responsible if there is a loss to their unit. A condo owner should also be aware that the association's policy may be changed over time when the policy is renewed or updated. It is advisable to have a coverage called "Loss Assessment" with a limit at least equal to the deductible on the associations master policy. This will protect you from a large out of pocket expense if you are assessed for all or part of the deductible due to a covered loss to the property.
Knowing these details will help policyholders get the proper amount of coverage while also avoiding a bill for damage they thought the association covered.
If you have any further questions, please contact us at Rongstad Insurance Services today!