Condo or townhome insurance offers coverage similar to homeowner insurance. It's for people who own an individual unit within a larger condo or townhome community.
For people living in these communities, there’s typically two insurance policies that cover different parts of their living space. One is paid for by owner dues and covers certain losses for the community’s Homeowner's Association (HOA). The other is an insurance policy the owner buys, which is sometimes referred to as an HO-6 policy. These two policies work in tandem to cover losses inside and outside the owner’s individual unit.
Understand the coverage noted in your HOA governing documents
The coverage for the structure of the individual condo unit is based on the HOA’s governing documents.
Coverage under the HOA policy typically falls into one of these categories:
All-in
The HOA covers the exterior and all interior finishes, such as doors, windows, siding, shower/tub, vanity/cabinets, paint, baseboards/trim, light fixtures and floor coverings. Unit owners are responsible for the HOA deductible on their insurance policy.
All-in excluding improvements or betterments
The HOA covers the unit to its original interior and exterior finishes and does not cover any changes or upgrades from the owner. Examples of owner changes or upgrades could include changing out the original laminate countertops for granite or replacing the original carpet floor for tile. It could also include repairs to a skylight added by a previous owner of the unit. Unit owners are responsible for the HOA deductible and the costs to repair any items changed from the unit’s original finishes using their own condo policy.
Bare walls or walls out
The HOA covers damages up to the uncovered sheetrock and subfloor — anything that could occur outside your owned unit. This includes the roof, maybe the windows, fencing, carpet in the hallway of a condo complex and other common areas. Unit owners are responsible for the HOA deductible and all interior finishes, which includes shower/tub, vanity/cabinets, paint, baseboards/trim, light fixtures and floor coverings.
If you’re unclear what your HOA's governing documents state about what it covers, speak with the HOA president or the property manager who manages the HOA. Each year when the HOA policy renews, unit owners receive a Certificate of Insurance, which will confirm the limits for the HOA and the deductible on their policy.
Insurance rates for HOA’s have gone up significantly since 2019, but they’re going toward covering the HOA’s insurance and providing them with money to do things like upgrades and repairs.
What a standard condo policy (HO-6) includes
Condo insurance is normally a special package that combines different coverages to protect a condo unit’s owner from losses. If you’re shopping for condo insurance, ask your agent or broker about these coverages:
- Structure/Dwelling: Covers your personal unit based on the HOA governing documents.
- Personal liability: Provides protection against claims someone else makes against you.
- Premises medical coverage: Pays the medical expenses of others accidentally injured on the property you own.
- Additional living expense: Pays for your cost to stay somewhere else temporarily if the living space you own is deemed unlivable due to a covered claim.
- Personal property (contents) coverage: The loss of valuable personal property, such as gold or jewelry, may exceed the standard condo coverage limits of your condo policy. Most have a specific dollar amount that the policy covers, and it’s often based on actual cash value at the time of loss, not the full replacement value. If you have expensive jewelry, heirlooms or other similar items, you should talk to your agent about an endorsement to the policy that offers replacement cost coverage and/or increased limits to some of the specific dollar limits.
- Loss assessment: This coverage may help you pay for special assessments the association charges its members for losses the HOA sustained. For example, wind damage to the roofs of several units may exceed the coverage limits of the HOA’s policy, and the HOA may charge a special assessment to unit owners to cover the remainder of the damage. Loss assessment coverage can prevent you from paying out of pocket in situations like this. Keep in mind that if the cause of the damage is covered under your unit owner’s policy, then the loss assessment for that cause will also be covered.
What condo insurance doesn't cover
It doesn’t cover:
- Community property within the HOA.
- Flood or earth movement.
- Wear and tear, or maintenance items.
Many policies are written based on a specific type of damage or loss that’s stated by name in your policy. Check with your insurance agent or company to understand what your policy is designed to cover.