Purchasing a condo is an exciting milestone, but being a homeowner comes with unique responsibilities and risks. One of the most important aspects of condo ownership is ensuring you have the right insurance coverage. Unlike single-family homes, condos have shared spaces and structures, making the insurance requirements more complex. Proper insurance protects your investment, provides peace of mind, and is often a lender requirement for securing a mortgage.

In this article we will briefly go over the insurance your condo HOA will have but the majority will go over what insurance you need to order before you close on your home. As a first time homeowner or someone who hasn’t bought a home in awhile you may be so caught up in the other parts of buying a home that insurance is the last thing you think about. Another reason is a lot of home insurance policies have been going up lately. This may lead to you going online and looking up what you are paying for which just happened to a past client/friend of mine and sparked me to write this article. Let’s get into it!

Why Condo Insurance is Crucial

Condo insurance is crucial for a number of reason. Let’s review a few:

1. Protection of Your Investment: Your condo is likely one of your most significant investments. Adequate insurance coverage ensures that this investment is protected against various risks, including damage to the property and liability issues.
2. Lender Requirements: Mortgage lenders require specific insurance coverage to protect their interests. Ensuring you have the right policies in place can streamline the financing process and prevent any last-minute hurdles.
3. Compliance with HOA Rules: Condo associations often have insurance requirements for unit owners. Understanding and complying with these requirements is essential to avoid penalties or coverage gaps.
4. Peace of Mind: Knowing that you are fully protected against potential losses, whether due to natural disasters, accidents, or liability claims, allows you to enjoy your condo living experience without constant worry.

Key Types of Insurance You Need

Master Policy (HOA Insurance)

The Homeowners Association (HOA) typically holds a master condo insurance policy that covers the common areas and exterior structure of the condo building. This policy usually includes:

• General Liability Insurance: Covers accidents and injuries that occur in common areas such as hallways, lobbies, elevators, and recreational facilities.
• Property Insurance: Covers damage to the exterior of the building and shared spaces. This includes the roof, walls, foundation, and shared amenities like gyms, pools, and community rooms. In my case I have a roof deck which it not covered by the HOA. Just the downward slopping areas with Spanish tiles.

Types of Master Policies:

• Bare Walls-In: Covers only the exterior framing and structure of the building. It does not cover anything inside the individual units such as drywall, flooring, or fixtures.
• Single Entity (Walls-In): Covers the building structure and standard fixtures within individual units, such as original installations like sinks, countertops, and cabinets. Upgrades or improvements made by the unit owner are not covered.
• All-Inclusive (All-In): Covers the building structure, standard fixtures, and any improvements or upgrades made by the unit owners. This is the most comprehensive type of master policy.

Note: Always review the HOA’s master policy to understand what it covers and identify any gaps that need to be filled with personal insurance. If you have any questions please feel free to reach out at James.Daniel@james-danielexprealty-com-2

Condo Unit Owners Insurance (HO-6)

This insurance is tailored specifically for condo owners. This is the insurance that you will pay for on a monthly bases and is in most cases included in with your mortgage payment ( if you have it set up this way). In the new 2024 purchase agreement condo insurance is now a contingency in which a buyer will need to find insurance before closing on a their home. It generally covers:

• Dwelling Coverage/Interior Structure: Protects the interior walls, fixtures, and improvements within your unit. This includes drywall, flooring, and built-in appliances. If the master policy is “bare walls-in,” the HO-6 policy becomes even more crucial as it will cover everything from the walls in.
• Personal Property: Covers personal belongings within your unit, such as furniture, electronics, clothing, and other personal items. It’s important to take an inventory of your belongings and ensure your coverage limits are adequate.
• Liability Coverage: Protects against lawsuits for bodily injury or property damage caused by you, your family members, or pets. For instance, if a guest slips and falls in your condo, this coverage can help pay for their medical expenses and any legal costs if they sue. You can also purchase umbrella insurance addition to this that coverages $1M of any cost that may come in an incident.
• Loss of Use: Covers additional living expenses if your unit becomes uninhabitable due to a covered loss. This includes costs for temporary housing, meals, and other living expenses while your condo is being repaired. My wife and I were talking about this over dinner last night before I wrote this article. We asked ourselves if we had to by out of our home for 3 months how much would we need daily to pay for housing ( airbnb, furnish finder, hotel etc) and how much would we need to eat per day. By doing this yourself will help you get to the right amount need to allocate for this coverage.
• Medical Coverage: This is designed to cover medical expenses for guests who are injured on your property, regardless of who is at fault. It provides a no-fault solution to cover minor injuries and prevent potential lawsuits by quickly addressing the injured party’s medical needs
• Loss Assessment Coverage: Provides protection if your HOA levies a special assessment to cover a major loss or repair that exceeds the master policy’s limits. For example, if the building’s roof needs replacement and the cost exceeds the master policy’s coverage, this coverage can help pay your share of the assessment.

Additional Optional Coverages

These coverages may be needed depending on where you live or preference:

Flood Insurance

Standard condo insurance policies do not cover flood damage. If your condo is in a flood-prone area, purchasing separate flood insurance is essential. This can be obtained through the National Flood Insurance Program (NFIP) or private insurers.

Earthquake Insurance

Condo insurance policies typically do not cover earthquake damage. If you live in an earthquake-prone area, consider purchasing separate earthquake insurance to cover structural damage and loss of personal property.

5. Umbrella Insurance

An umbrella policy provides additional liability coverage beyond the limits of your condo insurance. This is useful if you have significant assets to protect or if you want extra peace of mind.

6. Assessment Coverage

This optional coverage helps pay for special assessments levied by the HOA for major repairs or damage that exceeds the master policy limits. It’s particularly useful if the HOA’s policy has high deductibles or insufficient coverage for major events. For example, a tree falls on your condo and the HOA doesn’t have enough money to pay for the damage. Depending on how much coverage you ask for this can cover the amount you would have to pay for that your HOA reserves couldn’t.

Conclusion

When buying a condo, having the right insurance is essential for protecting your investment and ensuring financial security. Reviewing the HOA’s master policy and supplementing it with personal condo insurance, flood, earthquake, umbrella, and assessment coverage will provide comprehensive protection.

I hope this give you a breakdown on what types of insurances you may need when buying a condo. If you have any question please feel free to reach out!

JDanielRealEstate.com