Condo insurance: What is it and do I need it?
Fact-checked with HomeInsurance.com
Whether you’re purchasing a condominium as a starter home or buying one for a vacation home, you need to protect your asset with condo insurance. Condo insurance offers many of the same protections as homeowners insurance, covering your unit’s structure and your personal belongings.
Unlike home insurance, a condo policy works jointly with additional coverage provided by a homeowners association. If you finance a condo, your lender will require you to purchase a condo policy, and chances are, your homeowners association will too.
If you’re looking for the best condo insurance, get to know how condo insurance works and how to decide how much you need.
HOA vs. condo insurance
Two types of property insurance policies cover a condominium: a homeowners association policy and an individual condo policy. Building managers purchase HOA policies, sometimes called master policies, using money collected from association fees. HOA policies cover the building structure, including common areas, elevators, exterior walls and roofs.
In most cases, HOA policies don’t cover individual condominium units, so owners must purchase condo insurance, referred to as an HO-6 policy in the insurance industry. Typically, HO-6 policies offer minimal structural coverage. For instance, your condo policy may only cover damage to ceilings, floors and walls within your unit. HO-6 policies also offer liability and property protection.
What’s covered by the HOA?
HOA policies can vary depending on the rules and covenants of the homeowners association. Bare walls HOA policies cover collectively owned areas of the building and bare structural components of individual units such as ceilings, floors and walls. A bare walls policy would cover common areas such as lobbies and recreational areas but won’t cover elements like appliances, cabinets, floor coverings and wallpaper within your unit.
All-inclusive or all-in HOA policies provide the same coverage as bare walls policies but also cover fixtures within your unit and structural improvements you’ve made to your home. For example, if a grease fire destroys your kitchen, an all-in policy would provide coverage to replace your cabinets, flooring and wallpaper, even if you’ve replaced original elements. An all-inclusive HOA policy won’t cover personal property such as dishes and cookware.
HOA policies typically offer two types of protection:
- Liability coverage: Liability coverage helps pay medical expenses when someone sustains an injury in a common area of the condominium complex. For example, if a guest of a tenant slips and falls on a common patio, the association’s HOA liability coverage can pay the medical bills. This type of coverage also helps pay legal fees if someone sues the association over an accident in a common area.
- Property coverage: Property insurance covers common areas and commonly owned parts of the complex, like basements, clubhouses, courtyards, elevators, exterior walls, fitness centers, playgrounds, pools, stairways and roofs. If a storm damages the roof of your condominium complex’s clubhouse, the management can file a claim against the HOA property coverage. Property coverage can cover damages caused by a variety of perils, including, fires, storms and vandals. Like a homeowners policy, HOA insurance often excludes damages caused by earthquakes and floods.
Because coverages and exclusions can vary, read your policy carefully.
What does condo insurance cover?
Condo insurance is like homeowners insurance with a few differences. Typically, condo policies cover losses caused by the same perils as a standard homeowners policy, including:
- Accidental discharge of water from appliances or plumbing
- Accidental and sudden burning, cracking or tearing apart of systems such as air conditioning and heating systems
- Civil unrest and riots
- Falling objects
- Fire and lightning
- Frozen appliances, air conditioning and heating equipment or plumbing
- Power surges
- Volcanic eruptions
- Weight of ice, sleet or snow
- Windstorms and hail
Standard condo policies include:
- Dwelling coverage: When a covered peril damages your condominium’s structure, your dwelling coverage can help pay for repairs. For example, if a storm causes water damage to your carpeting, dwelling coverage can help pay to replace it. Before purchasing dwelling coverage, find out if your homeowners association’s HOA insurance covers structural damages to your unit.
- Loss of use coverage: Also called “additional living expenses” coverage, loss of use coverage can help pay your living expenses if you’re displaced from your condominium following a covered loss. For instance, if a fire destroys your living room, this coverage can help pay your hotel and meal expenses while a contractor repairs your condo.
- Medical payments to others: If someone falls and sustains an injury in your condo, this coverage can help pay the medical expenses.
- Personal liability coverage: When someone sues you following an accident in your home, personal liability coverage can help pay your legal bills. Some condo policies combine medical payments and personal liability coverages. Typically, liability coverages start at $100,000 to $300,000, but you can increase coverage to fit your needs.
- Personal property coverage: If a burglar steals your TV or a fire destroys your sofa, personal property coverage can replace them. Most personal property coverage pays actual cash value, which pays the depreciated value of your belongings. Many insurers offer optional replacement cost coverage, which allows you to replace your property at current prices.
|What condo insurance covers||What condo insurance doesn’t cover|
|Electronics and computers||Roofs|
|Cabinets||Condo owner’s medical expenses|
Remember the basics
A condo policy works like homeowners insurance, covering your personal property, protecting you against costly lawsuits and providing limited property coverage.
Cost of condo insurance
According to a 2020 study, Americans pay an average annual condo insurance premium of $625 per year, based on a policy that includes $300,000 in liability and $60,000 in personal property coverage. Rates can vary widely by location.
Other factors that can impact your condo insurance rates may include:
- Age of condominium
- Amount of coverage
- Deductible amount
- Neighborhood crime rates
- Past claims
- Policyholder’s age
- Policyholder’s credit score
- Proximity to the nearest fire station
- Type of construction
It always makes sense to purchase condo insurance. Even if you don’t have many valuable possessions, you still need liability protection. Most condominium homeowners associations also require condo owners to carry insurance.
Best companies for condo insurance
While there are several options for condo insurance, some providers stand out.
Best discounts: Allstate
Allstate policyholders who are retired or at least 55 years old can save up to 25 percent on condo insurance. You can also earn up to a 15 percent discount if you install safety devices such as fire extinguishers and smoke alarms and up to 15 percent if you bundle your condo policy with auto insurance.
Best optional coverages: Amica Mutual
Often, standard condo policies don’t provide all the coverage you need. Amica Mutual offers optional personal property replacement cost coverage and scheduled personal property coverage to protect your most valuable possessions like artwork and jewelry. You can also add computer coverage for expensive laptops, smartphones and tablets. Amica condo insurance policyholders can also add identity fraud coverage, which can reimburse you for fraudulent credit card charges and identity restoration expenses.
Best overall coverage: Chubb
Chubb’s standard coverage goes the extra mile by including full-value coverage for additions or alterations to your condominium. It also includes up to $50,000 in loss assessment coverage. When homeowners associations file an HOA claim, condo owners may have to foot the bill to pay the deductible. With loss assessment coverage, your condo policy will have you covered.
Best condo insurance ratings
|AM Best rating||Better Business Bureau rating|
How much condo insurance do I need?
To determine how much condo insurance you need, review what your homeowners association’s HOA policy will cover. If the HOA policy provides little or no coverage for your unit, estimate how much it will cost to replace structural items such as built-in appliances, flooring, kitchen cabinets, lighting fixtures, plumbing fixtures and wall coverings.
Also, take an inventory of your personal belongings, including artwork, clothing, electronics and furniture. When compiling your list, collect receipts for items and determine how much they will cost to replace at today’s prices. The sum of all your property values will determine the amount of personal property coverage you need. Most standard condo policies only pay actual cash value for personal property and set limits on how much they will pay for certain types of items. Purchasing replacement cost coverage and additional coverage for your most expensive belongings can pay off if you need to file a claim.
Determining the amount of liability coverage you need is more subjective. If you like to entertain guests or have kids that enjoy hosting sleepovers, you might need to increase your liability coverage.
Condo insurance works in concert with your homeowners association’s HOA coverage. Before purchasing a condo insurance policy:
- Determine what your condominium complex’s HOA policy covers.
- Find out how much dwelling coverage you need to replace structural elements.
- Decide how much it will cost to replace your personal belongings.
Like homeowners insurance, purchasing condo insurance makes financial sense. The rate you’ll pay for condo insurance depends on numerous factors, including your location. If you live in an area prone to natural disasters, you may need to buy additional coverages like earthquake or flood insurance. Choosing the best condo insurance company requires research. To start, turn to trusted sources, like the annual J.D. Power U.S. Home Insurance Study, which rates and ranks insurers based on customer support, claims handling, price and policy offerings. Also, research a provider’s financial strength by reviewing credit ratings provided by AM Best, Standard and Poor’s and Moody’s.