Before you purchase your condominium, you need to think about condo insurance. This requires taking a different approach than you would for a single-family home. For example, someone who owns a house would consider the cost of the entire structure and everything inside in case of a natural disaster or fire. For a condo, you need to think more in terms of what’s inside—your furniture, electronics, etc. Because as a condo owner, you’re part of a larger condominium community; and therefore, you’re usually not responsible for everything on the outside of the complex.
Here we break down the four biggest considerations for getting the right amount of coverage for your condominium.
- Know what you own.
What are YOU responsible for, and what is the condo association responsible for? You’ll need to know this up front.
You also need to understand what condo insurance is. Condo insurance provides coverage for anything not already covered in the condo association’s master policy. This includes protecting your personal belongings in the event of things like fire or burglary, as well as protecting you against liability claims if you’re responsible for someone else’s injury while in your condo.
NOTE—To make sure you’re protected from theft or burglary, your insurance must include personal property coverage.
The master policy, also known as an HOA policy, typically covers common areas shared by condo owners—lawn areas, walkways, pool, fitness center, exterior elements, parking areas, etc. As a condo owner, you can expect to pay association fees, which go toward maintaining these common areas. These fees also help to insure these areas. You should be able to see what the condo association’s master policy covers—including what areas are covered through association fees, and what areas are not.
There are two kinds of master policies: “bare walls-in” and “all-in.” Bare walls-in will cover the property from the exterior framing inward, but doesn’t cover fixtures and installations within the actual condo unit itself. These include flooring, granite countertops, bath and kitchen fixtures, etc. All-in will cover these fixtures and interior additions—everything inside the walls of the condo unit.
What does this mean to you? If your master policy is a bare walls-in type, you’ll need to get more condo coverage to protect yourself. If the master policy is an all-in type, you won’t need as much coverage, as the majority of important things will already be covered.
- Know your deductible.
Before buying a condo, you should know how expensive the association deductible will be. If there should be a hurricane, for instance, and there is severe damage to the condo buildings, the association would file a claim to be covered for this damage. Keeping this in mind, there would be a deductible, which is assessed against all unit owners. For example, if the master policy has a $5,000 deductible, and there are 20 unit owners, each owner would have to pay $250. There has been a trend toward more expensive deductibles, and it can range from $5,000 all the way up to $50,000. So please do your research first, so you won’t be hit with a huge surprise bill later on.
- Know your coverage.
When deciding on the amount of coverage you’ll need, you’ll want to imagine what the cost would be to replace items that are damaged by a fire or flood (more about flood insurance later). There are two basic categories for this kind of coverage: cash value and replacement cost. The latter is clearly better, and here’s why: If you only have cash-value coverage, and your appliances are ruined, you’ll receive a check for what they were worth when you bought them, possibly three years ago and lots of wear and tear later. With replacement cost, you’ll get back enough to replace the appliance with a brand new one. So the five-year-old TV can be replaced with a nice, new flat screen. Replacement cost is the way to go, so you won’t lose money.
The U.S. government offers flood insurance to every homeowner. Often this coverage may be optional, unless you live in a designated flood zone. If this is the case, you may need additional personal flood insurance, because the association’s flood insurance won’t cover your personal items or the interior structure of your unit.
- Know the cost of your condo insurance.
The cost of condo insurance varies. It ranges from $100 to $400 a year, but this depends on the value of your property and the type and amount of coverage you carry. If you own jewelry and fine art, you’ll have more expensive insurance to cover that. You should also know that condo insurance is not tax deductible. However, if you should rent your condo to someone else, you might be able to deduct the cost of your condo insurance. You may also do this if you run a business out of your condominium.
Of course, there is so much more to cover on this subject, so keep checking our blog for more helpful information, including things to watch out for.
For all your home, auto and other insurance needs, please contact Zawada Insurance Agency. We work to give you comprehensive coverage at a competitive price.
Zawada Insurance Agency, Inc. is a family-owned and operated independent insurance agency, located in Worcester, Massachusetts, serving central Massachusetts and beyond.