Homeowners insurance for condos

When it comes to insuring a condo, the rules are a little different since the homebuyer is sharing walls, ceilings, floors etc. Be sure your homebuyer realizes the "Master Policy" the condominium association provides probably does not cover items inside the condo.

Typically two separate policies are required to protect the homebuyers new investment. The association should have a clear guideline as shown by an Areas of Responsibility List, which defines those responsibilities.

The master policy

The "master policy" provided by the condo/co-op board typically covers the common areas shared with other tenants in the building like the roof, basement, elevator, boiler and walkways for both liability and physical damage.

To adequately insure the condo, it is essential to know what structural part of the home is covered by the condo/co-op association, and more importantly, what is not. This information is in the association's bylaws and/or proprietary lease.

Occasionally the association is responsible for insuring the individual condo or co-op units, as they were originally built, including standard fixtures. In this case, the homeowner would only be responsible for alterations to the original structure of the apartment, like remodeling the kitchen or bathroom.

Sometimes this includes not only improvements, but also those made by previous owners.

Homeowner's insurance

This insurance provides coverage for the homebuyer's personal possessions, structural improvements to the condo and additional living expenses if victim of fire, theft or other disaster listed in the policy. Liability protection is also an option.

When your homebuyer is ready to purchase the individual homeowner's insurance, it is imperative to find an agent or company that specializes in condominiums or co-ops. Remind your homebuyer to ask about all available discounts

A few examples:
  • Reduce rates by raising the deductible.
  • Install a smoke and fire alarm system that rings an outside service.
  • Keep a fire extinguisher in the kitchen.
  • Get insurance with the same company that underwrites the building's insurance policy.

Insurance options

Here is a list of items that your homebuyer may want to ask the condo association about to see what is covered, and what additional coverage they would need to purchase.

  • Unit assessment: This provides reimbursement for the homebuyer's share of an assessment charged to all unit owners as a result of a covered loss. For instance, if there was a fire in the lobby and all the unit owners were charged the cost of repairing the loss, this type of insurance would provide coverage.
  • Water back-up: Insures homebuyer's possessions for damage by the back-up of sewers or drains.
  • Umbrella liability: This is an inexpensive way to get more liability protection and broader coverage than what is typically in a standard condo/co-op policy.
  • Floater or endorsement: This is additional coverage for expensive jewelry, furs or collectibles. Usually, there is a $1,000 limit for theft of jewelry.
  • Building property: This covers the unit features that are an owner's responsibility to maintain and insure including finishes (wallpaper, flooring), fixtures (lighting, cabinets), unit alterations and additions.
  • Personal property: This covers items like clothing and furniture. Make sure to buy replacement cost insurance, not depreciated basis.
  • Loss of use: This coverage pays certain expenses if a condo is damaged and uninhabitable.
  • Loss assessment: This will pay the insured's share of a special assessment required if the association has an insured loss and the insurance does not cover it.
  • Personal liability: This pays the insured's legal liability for financial damages resulting from someone being injured in the unit. It also pays for legal defense against these claims or suits.
  • Medical payments to others: This pays necessary medical expenses for guests who are accidentally injured.

Some final considerations

All condo insurance is not the same. Also, condo owners insurance is a personal insurance policy so home businesses require additional riders or a separate policy. Also, if the condo is rented, landlord insurance is required.

Once the homebuyer has settled on a policy, remind them to provide their insurance agent with a copy of the governing documents and association insurance policy so the agent knows what their insurance responsibilities are.

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