The ownership structure of a condominium unit is different from that of a single family house. Here’s what you need to know when purchasing insurance for your condo.¹
Understand the Master Policy
Since the ownership of all the common areas is shared with other condo owners, the association of owners typically purchases insurance coverage (a master policy) for the common areas, e.g., hallways, exterior walls, etc. The condo association’s policy will outline what is covered and what is not.
Three Types of Coverage
There are three basic types of coverage under a master policy.
- Primary buildings and common areas
- Your unit and any items within your unit other than personal belongings
- Building, unit, and any fixtures
As you can see, the individual coverage you may consider depends upon the scope of coverage of the master policy. Start by determining what is and isn’t covered under the master policy—that can influence the coverage you need.
Know the Master Policy Deductible
Generally, an association’s master policy has a deductible that is typically charged pro-rata among unit owners in the event of any claim. Determine that obligation because, while it may never materialize, it can represent a meaningful financial commitment.
Consider Additional Coverage
Similar to any homeowner, you will need to make decisions about other coverage options, such as cash value or replacement coverage, adding personal liability coverage, and whether flood insurance may be appropriate.
Several factors will affect the cost of condo insurance, including the insurance coverage provided by the homeowners association. You should consider the amount of your deductible and level of coverage before purchasing a condo insurance policy. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.