Condo insurance is vastly different from home insurance. While it’s true that it does provide many of the same benefits of a home insurance policy, condo insurance is constructed specifically to help fill the gaps between your condo association’s insurance policy and your personal responsibilities for your own belongings and liability.
If you are wondering if condo insurance is something that you need, the answer is yes—absolutely. Especially because most banks and condo associations will require it. So how do you decide how much is right for you? That will depend on multiple factors including what’s covered by your condo association’s insurance policy.
In this article, we will explore the intricacies of condo insurance so you can feel confident in your property coverage decisions.
How does condo insurance work?
Your condo should be protected by two insurance policies. The first is a master policy for the building, and this is held by the condo association. The second is an individual policy that you purchase. This will help cover and protect your liability and personal belongings. Your individual policy will also insure any structural elements, renovations, or additions that are not covered in the master policy.
What’s a master policy?
Your condo’s building management will own a master insurance policy. The master policy covers liability and physical damage in areas of the building that you share with your neighbors. Examples of these areas are places like the roof, basement, walkways, and community facilities. Your building management will typically pay for the master policy with a portion of your maintenance fees or association dues.
It is possible that the master policy will also insure alterations that were made to the original building. This would include things like a remodelled kitchen or bathroom. Consequently, it is imperative that you closely review the master policy before you purchase your individual condo insurance policy. That way, you can ensure that you have enough insurance coverage.
The following is a brief peek at different types of master condo insurance policies:
Bare wall policy: This master policy covers the exterior walls of the condo. Condo owners are responsible for insuring everything on the inside of the condo. This includes interior walls, floors, kitchen and bathroom fixtures, and appliances.
Single entity policy: This master policy covers nearly everything in the building. Condo owners are responsible for insuring their personal belongings and any upgrades they make to the unit.
All-inclusive policy: This master policy goes one step further than a single entity policy. It also insures any upgrades or additions that are made in the unit. It proves to be the most comprehensive master policy.
Information on the master policy can usually be found in your condo association’s bylaws or lease agreement. Be sure to review this information with your independent insurance agent and contact your condo board or association if you have any questions.
What’s an individual policy?
Your individual policy will provide insurance coverage for your personal possessions, anything that’s not protected by the master policy in the event of a covered loss, and personal liability.
You want your condo to have the ultimate protection, so talk to your independent insurance agent about these additional condo insurance coverages:
- Additional living expenses. This may be included in a standard individual condo policy. However, it is important that you ask your insurance agent about it to be sure. Coverage such as this would help to pay for the cost of living elsewhere while your condo is being repaired after a covered loss.
- Unit assessment. This coverage reimburses you if a covered loss in a common area results in all unit owners being charged the cost to repair the damage.
- Water and sewer backup. The coverage protects your property from damage caused by sewer or drain backups which would fall outside of a flood insurance policy. (Note: Flood insurance must be purchased separately.)
- Umbrella liability. This is additional liability protection on top of your individual policy. Your insurance agent can help you determine if this additional coverage is right for you.
- Personal contents. You may need additional coverage for your personal belongings if their value exceeds the limits in your individual policy. For example, expensive jewellery or collectibles may need additional insurance coverage.
- Cyber and identity theft. This coverage helps cover the costs involved in recovering from a cybercrime or identity theft. It may also provide professional services to help you recover.
- Earthquake insurance and flood insurance. If you live in a disaster-prone area, this is something that you may want to consider purchasing.
How much condo insurance do you need?
To determine how much condo insurance you need, speak with your independent insurance agent. Together, you can follow the steps below to guarantee bulletproof protection.
- Look at the master policy. Review your condo association’s master insurance policy and determine what’s NOT covered.
- Create a home inventory. Add up the value of your personal belongings and share this information with your insurance agent. This will help you to determine if you have the appropriate monetary limits in your individual policy.
- Determine your liability risk. Take a look at your personal finances with your insurance agent to determine your liability risk.
- Calculate additional living expenses. Find out how much it would cost to rent an apartment in your area and talk to your agent about this coverage.
- Learn about the area. Ask your insurance agent if you live in a flood or earthquake zone.
- Consider additional coverage. Talk to your agent about the estimated cost to recover from a sewer backup, cybercrime, identity theft, etc.
The bottom line is that you love your condo lifestyle, so make sure you protect it with insurance coverages that make sense for you.
This article is for informational and suggestion purposes only. If the policy coverage descriptions in this article conflict with the language in the policy, the language in the policy applies.
– Insurance Information Institute