Understanding Key Components of Condo Insurance

Gaurav Bhola, MSM, Managing Editor

Most people have heard of home insurance but not condo insurance. The obvious difference is that, condo insurance is for condominium real estate and not homes. Condos are basically apartments that you can own. You don’t have to worry about cutting your lawn or shoveling the driveway.

Unlike a home, a condo owner is only responsible for insuring his part of the condominium property. However, rules differ from condo complex to condo complex, and it's critical to understand the main components of the condominium insurance coverage.

Here are the important things to know about a condo insurance policy:

Master policy

You are responsible for insuring your part of the property within the condo complex. All condo owners have a collective responsibility for insuring common areas including, building exteriors, hallways, the pool area, and etc. Generally, the condo association collects monthly dues and uses portions of the dues to insure these common areas.

There are two main types of master policies:

  1. Bare walls-in. Offers bare coverage of all real property extending from the exterior framing inward. The policy excludes installations and fixtures contained within the condo unit. Herein, bathroom and kitchen fixtures, kitchen granite countertops, and flooring are not covered.
  2. All-in. Provides the most comprehensive coverage. Coverage includes installations, fixtures, and additions to the interior surface, ceilings, and floors.

Association deductibles

Every condominium complex has a condo association, which uses the collective dues to buy commercial insurance coverage for commonly shared building and areas. These policies have an association deductible, used mostly in cases of a natural disaster. If the complex needs major renovation, the claim for the damage would be paid by the commercial insurer. But the insurance deductible would be paid by the condo owners equally.

This information is available for your eyes in the association’s bylaws; peruse them before making a decision to purchase a condo. It is worth noting the responsibilities of the association and the condo owners.

Amount of coverage

Once you have ascertained the parts of the condo unit you must insure individually, you are now ready to decide how much coverage you need. An easy way to estimate the amount of insurance coverage needed is to take about half off the market value of the interior structures.

Replacement cost or cash-value coverage

After determining the appropriate coverage amount, you have to now decide how much coverage to purchase.

There are two basic categories: replacement cost or cash value:

Replacement cost insurance coverage replaces the old item for what it would have cost if you were to buy it today. Cash-value insurance coverage replaces the depreciated value of the insured items, not the original value.

Insure contents and structure

During the process of insuring your condo, make sure you are covered for both contents and structural items.

The following are examples of content and structures:

Examples of structure

  • Flooring
  • Countertops
  • Cabinetry
  • Lighting
  • Carpeting

Examples of content

  • Jewelry
  • Furniture
  • Area rugs
  • Electronics
  • Artwork/collectibles

The approach to acquiring condominium insurance is different than home buying. Homeowners insurance or home insurance is approached from the perspective of covering the structure first and then the cost of replacing the interior contents. Conversely, the condominium owner approaches insurance needs differently than a homeowner. The condo owner is concerned about insuring the interior content first and then the structure.

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