Condo Insurance: Explanation Of Condo Insurance

Owning a condo is much less trouble than owning a house; but your condo insurance can be much more complicated. Your condo association has a master insurance policy and can cover a large portion of the main building and common grounds. The items your condo association must include vary greatly between states, municipalities and even condo complexes. Make sure you are very clear on what you need to include in your condo insurance.

Your association’s policy may cover damage and liability for:

  1. The main building, including the walls, roof, and floors; and the common grounds, including the parking lot and community gym.
  2. They may also include items in your unit, such as interior walls, appliances, carpeting, and kitchen cupboards.
  3. They may also add coverage for your unit’s structure, fixtures and any of your renovations.

Unit owners usually pay a condo fee to the association for the maintenance and insurance covering the common grounds and building. In the event there is damage to the main building or common grounds resulting from a hurricane or other major event, unit owners are responsible for an equal share in the association’s insurance deductible.

You can reduce your insurance rates by doing any of the following:

  • Having an insurance claim-free history.
  • Having a good credit report and score.
  • Installing home security devices, such as burglar alarms, smoke detectors and fire extinguishers.
  • Increasing your deductible.
  • Combining your condo insurance with your car insurance and other policies.
  • Living in close proximity to a fire station or fire hydrant.
  • Living in a neighborhood with a low crime rate.
  • Being a non-smoker.

You can increase your indemnity by choosing replacement-cost coverage that gives you a cash payment to replace your damaged item with a new one, rather than actual cost-value coverage, which will give you a cash payment in the amount of your item minus its depreciation. The replacement-cost coverage has a higher premium, but depending on the item, the cash payout difference could be in the thousands of dollars.

Condo Insurance: Explanation Of Condo Insurance

Take the time to learn what your condominium association’s master insurance policy covers. There may be a lot of items for which you do not need coverage; however, there may also be a number of important items and perils that you do need to cover.

Condo Insurance: What Does Condo Insurance Cover?

Personal property damage and injury, theft, lawsuits and their resulting expenses are not covered by your condominium association’s master insurance policy. There also may not be coverage by your association for any of the renovations, additions or customizations you may do to your unit.

Everything from your towels to your computer to your grandmother’s ring may need to be on your condo insurance policy. Your insurance company will require an inventory, estimated value and photographs of all your personal belongings. Take the time to compile this list and then store it in a safe place other than in your condo building. This is to ensure your list is still available to you and your insurance company even after a fire or a break-in.

Condo insurance can cover your property in your home or in any other location in the world. You can be covered for damage from:

  • Fire and smoke.
  • Severe weather, such as windstorms and hail.
  • A collapse due to ice, snow and sleet.
  • Frozen plumbing.
  • Water overflow from a damaged water heater.
  • Theft, vandalism and even a riot or civil commotion.
  • Vehicles crashing into your unit, such as aircraft, watercraft, cars and trucks.

Condo insurance can cover a large variety of contingencies, liabilities and their resulting expenses:

  • Guests’ property damage and injury.
  • Liability for damage done by you or your family on or off your condo’s premises.
  • Repair costs, debris cleanup, emergency service charges and temporary lodging.
  • Spoiled products from a refrigeration failure.
  • Re-keying your locks after a theft.
  • Coverage is automatically increased as inflation increases.
  • Lost tenant rental income during repairs on an investment condo.
  • Credit card fraud and counterfeit money.

Condo insurance does not, however, cover certain situations, events and items, including purposeful bodily injury or property damage, a home-based business, vehicles, building damage from deterioration, contamination, wildlife and pets. Flood damage can only be covered by special U.S. programs. Carefully review your policy and your association’s policy with your insurance agent to ensure you are fully covered.

Condo Insurance: Who Needs Condo Insurance?

Most condominium owners only need standard condo insurance. However, there are a number of special owners who require special coverage, including owners who buy a condo in an area susceptible to natural disasters such as earthquakes and fire.

Condo Insurance: What Does Condo Insurance Cover?

People who own condos in flood zones, where there is a regular occurrence of heavy rains, tropical storms and hurricanes, can only receive insurance through a U.S. government program called the National Flood Insurance Program (NFIP). To qualify for this coverage, you will need to meet or exceed standards put forth by the Federal Emergency Management Agency (FEMA). This coverage differs from water damage due to sewer backups or exploded water heaters, which can be covered under your standard condo policy.

Condo owners in an area that has frequent tornado activity can participate in a state-run program called the Wind Pool Association which will help you offset the costs of high wind damage. To qualify, your condo must meet the state’s high wind resistance standards.

There is an addendum available in condo insurance that is available to you if you live in a condo that was built in the shadow of a volcano. Damage due to volcanic activity, including shockwaves, ash or lava can be covered.

If you have a high-risk hobby like aircraft flying, you may want to consider extra liability coverage. You can add a liability umbrella policy that will add an extra layer of coverage to all of your policies.

As an investment, if you rent your condo out all or part of the time, you will require a policy that can cover damages or loss of income due to tenant negligence and other scenarios. As a landlord, you may not need content insurance if you rent your unit out empty; your tenants are responsible for covering their personal property. You may, however, need to cover your unit’s interior structure, walls, cabinetry, carpet and fixtures that your condo association does not cover.

Your condo renovations and customizations may need extra coverage due to their specialized nature. Also many condo associations do not cover any changes to units.

Your very valuable baseball card or stamp collection, art, jewelry and furs may require extra coverage. You can add a personal property floater that will extend the limits of a standard condo insurance policy.

Everyone should have condo insurance to avoid the financial pitfalls that occur due to unpredictable weather and human behavior.

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