Do You Have the Right Condo Insurance Coverage?

Good morning and welcome to winter! I don’t know about you, but I, for one, am glad the snow held off until now. However, I am still dreading the thought of clearing snow from this impending storm, and feeling jealous of those who live in condos and can leave snow removal to someone else.

Speaking of condos, we’ve had quite a few clients contact us recently regarding condo insurance, so I felt it would be a good idea to share some basics with you today. Without a doubt, condo insurance can be tricky and full of nuances. When purchasing a condo, it’s important to remember that you’re actually just purchasing the “box of air” inside the unit — you don’t own the structure, which is why you aren’t responsible for maintaining it (pretty great, right?). Keeping this in mind, a condo policy (called an HO-6) that you purchase will cover 1) your possessions inside the unit, 2) some of the building, and 3) liability. We’ll discuss all three in detail below.

Covering Your Possessions

The first thing to consider when purchasing an insurance policy for your condo is how much coverage you’ll need to cover your belongings. While a homeowner’s policy covers a certain percentage of personal property within your home, when it comes to condo insurance, the policy is structured based on the limit that we, the insurance company, choose.

While it can be tricky to determine the replacement value of your belongings, we suggest this rule of thumb: purchase $20K of coverage for each bedroom on the property and then an additional $15K for the kitchen, family/living room, and dining room as a baseline. So — for a 3-bedroom condo with a living room, we’d recommend $90K in contents coverage.

Covering Your Building

In general, the condo association covers the majority of the building. However, as a condo owner, you may be responsible for some parts of the building, for example mechanical items like the furnace and water heater. The key here is to read the condo association documents to understand what you’re responsible for and to build your policy around that in order to protect yourself. If you haven’t consulted your agent regarding the documents, I’d recommend you do that as soon as possible.

Condo Liability Coverage

Another condo-specific coverage that we feel should be a requirement is loss assessment. If you’re a member of a condominium association, and 1) collectively owned property is damaged or 2) your association becomes liable for a personal injury loss, the condo will typically assess the members to cover any shortfall. We recommend purchasing the maximum coverage that you can — usually around $50K — in order to protect yourself. Recently, a client of ours experienced this scenario when a serious mold claim led to a condo association assessing unit owners to collectively contribute $90K in repairs. Our client was covered by their loss assessment policy and didn’t have to pay anything out of pocket.

The bottom line? While condo insurance can be complicated, it’s not impossible to unravel. Take the time to review your coverage and consult with your agent, who can help you wade through condominium documents provided by the association. This will ensure that the coverage you purchase is appropriate to the risk.

As always, thanks again for the opportunity to protect your family and all the best in 2019.

Jon