Condominium units require a special type of insurance protection that a homeowners policy can’t provide. Since condos reside within a community, you’ll need a policy that covers just your individual unit and the personal belongings within it that make it a home. 

HO-6 policies are designed specifically for the coverage needs of condominium owners. These flexible policies allow you to customize your coverage, to provide just the right amount of protection, while avoiding over-insuring your property.

What is HO-6 insurance?

HO-6 policies, commonly called condo insurance, cover condominium units, co-ops and townhouses. The HO-6 form covers named perils, including:

• Accidental discharge of steam or water
• Aircraft
• Explosions
• Falling objects
• Fire and lightning
• Riots
• Smoke
• Theft
• Weight of ice, sleet or snow
• Vandalism
• Vehicles
• Volcanic eruptions
• Wind and hail

Named-peril policies only cover losses caused by those specifically listed on the policy. For example, if a thief burglarizes your condo, your HO-6 policy will pay to replace stolen property. However, if your kitchen pipes freeze and burst, your condo insurance won’t cover the damage because freezing isn’t included as a covered peril.

An HO-2 policy covers 16 named perils, but only applies to owner-occupied houses, not condominiums. The HO-3 policy is the most common form of homeowners insurance because it provides open-peril protection of a house’s structure. An open-peril policy covers losses caused by any type of peril, except those specifically excluded in the policy terms. However, HO-3 policies don’t cover condominium units.

Condo policies are different from homeowners policies because certain elements of condominium units are covered by a policy purchased by the condominium association, while others are covered by the unit owners’ HO-6 policy. Purchasing condo insurance requires you to strike a delicate balance between what your community’s policy will cover and the additional protection you need from HO-6 coverage. To make things simpler, this article should help you sort out the details.

Who needs HO-6 insurance?

Anyone who owns a condo, co-op or townhouse needs an HO-6 policy. No other type of policy can cover these types of housing units. Condo policies offer protection for your unit and personal belongings, which you’ll need if a storm or fire destroys your unit.

The lender will require you to purchase an HO-6 policy if you take out a mortgage on your condo. Lenders require condo owners to insure their units as a means of mitigating risk. If you didn’t carry condo insurance and a disaster totaled your unit, you would be stuck with ongoing mortgage debt and no home.

What does HO-6 insurance cover?

Most HO-6 policies provide similar coverages as homeowners insurance policies, including the following:

Dwelling coverage

Dwelling coverage – also called building property coverage – pays to rebuild elements of your condo’s interior, like ceilings, floors and walls. For example, if smoke damages your living room, this type of coverage will pay to replace ruined flooring and sheetrock. Dwelling coverage will also pay to repair or replace attached additions you add to your condo’s original structure.

Loss of use coverage

Following a major covered loss, you’ll likely need to move out during reconstruction. Loss of use coverage can help pay living expenses such as hotel rooms and meals. Typically, the coverage only pays the difference between your normal expenses and temporary living expenses. For instance, if you usually spend $500 per month for groceries, but must pay $900 for restaurant meals during your home’s reconstruction, your loss of use coverage would pay the $400 difference, based on your policy limit, minus deductible.

Medical payments coverage

If a guest stumbles down the stairs in your condo during a birthday party, medical payments coverage will help pay the medical bills. This type of coverage only pays the medical expenses of someone outside your household. If you sustain an injury in your home, you’ll have to rely on your health insurance.

Personal liability coverage

When a guest sustains an injury in your condo and sues you for damages, your personal liability coverage can help pay your legal expenses. Personal liability coverage can pay a wide range of expenses, from attorney’s fees to court or settlement costs.

Personal property coverage

Disasters can destroy more than your condo’s interior — they can also ruin your belongings. Personal property coverage pays to replace items such as artwork, clothing, computers, furniture and sports equipment. The personal property coverage in some HO-6 policies also provide protection for items in storage units.

What’s covered by the condo association or HOA master policy?

Condominium associations carry insurance policies that cover the entire complex. These policies are called HOA policies, or master policies, and provide two types of protection, including:

Liability coverage: The liability coverage of an HOA policy covers medical expenses if a non-resident sustains an injury in a common area of the property. For example, if a guest slips and falls at the community swimming pool, the master policy’s liability coverage can help pay the medical expenses. And, if the injured party sues the condominium association, the liability coverage can help cover legal costs.

Property coverage: Generally, an HOA policy’s property coverage pays to repair or rebuild common elements of the community. This can include exterior walls of condos, fences and gates, clubhouses and features such as swimming pools and tennis courts. For instance, if a tree falls on the community grounds and crashes through an office, the master policy’s property coverage will pay to repair or rebuild the structure.

Condominium associations have three types of HOA policies to choose from:

All-in coverage: This provides the most coverage for individual condo units. It covers the structures of condos, including fixtures within each unit, as well as the structural elements of common areas. For example, if a fire destroys several condominiums and a pool house, an all-in policy will pay to rebuild all affected structures.

Bare walls coverage: Bare walls master policies provide the least coverage for unit owners. This type of policy only covers exterior structural elements of a condo unit, like its exterior walls and roof. A bare walls policy may also cover damage to systems such as wiring and plumbing.

Single entity coverage: A single entity policy covers everything a bare walls policy does, plus a bit more. This type of coverage also pays to repair or replace built-in fixtures in individual units. For instance, if a car smashes through the wall of a condominium and destroys a built-in bookcase, a single entity HOA policy would pay to repair the wall and replace the bookcase. This type of policy often limits coverage to original built-in fixtures and won’t cover elements added by a unit owner.

What does HO-6 insurance not cover?

Like homeowners policies, condo policies exclude certain types of damage, including:

Earthquake damage

Most standard condo policies don’t cover losses to a condo’s structure, or personal property, caused by an earthquake. Many major carriers offer separate earthquake policies. Those who live in areas prone to tremors should purchase this important type of coverage.

Exterior damage

An HO-6 policy won’t cover damage to exterior walls. Only the master policy covers exterior damage to common areas and individual units. If a covered peril destroys an exterior wall and some of your personal property, the HOA policy would pay to rebuild the wall, while your condo policy would replace your personal items.

Flood damage

Most HO-6 policies won’t cover structural damage or loss of personal property caused by a flood. Some major insurance providers will facilitate the purchase of separate flood insurance policies through FEMA’s National Flood Insurance Program, or you can obtain it from a private flood insurer. Flood policies may cover:

• Air conditioning and heating systems
• Appliances
• Built-in bookcases and cabinets
• Debris removal
• Electrical systems
• Flooring
• Plumbing systems
• Wall coverings

Policyholder’s medical expenses

Although the medical expenses coverage of a HO-6 policy will pay the medical bills of a guest who slips and falls in your home, it won’t pay yours. If you sustain an injury in your condo, you will need to file a claim with your health insurance company to recoup your medical expenses.

Roof damage

HOA policies cover roof damage, but HO-6 policies don’t. If a calamity causes additional damage within your unit, the HOA policy would cover some losses, while your condo policy would cover your personal damage. For example, if a limb damages your unit’s roof and incoming rainwater destroys your sofa and chairs, the HOA policy would repair the roof and your condo policy’s personal property coverage could help pay to replace the furniture.

How much HO-6 insurance do I need?

HO-6 policies are flexible, enabling you to design one to fit your needs. The amount of coverage you need will depend on the value of your personal property and the type of policy your condominium association carries. For instance, if your community carries an all-in master policy, you won’t need much dwelling coverage. But, if it holds a bare walls policy, you’ll need to carry enough dwelling coverage to pay to rebuild all the interior elements of your unit, like sheetrock, flooring and fixtures.

To determine the amount of personal property coverage you need, take an inventory of your belongings and calculate how much it will cost to replace them. Similarly, determine the amount of personal liability coverage you need based on your lifestyle. If you’re a homebody who rarely entertains guests, you can probably get by with a minimum amount of liability coverage. But, if you like to throw parties or have kids who like to host sleepovers, you’ll need a higher level of liability protection.

A bit of extra protection is good, but if you over insure your condo, it will drive up the cost of your insurance premium.

Choosing an HO-6 insurance policy

You need an HO-6 policy that fits your personal needs. First, consider the level of personal property coverage that a standard condo policy can offer. Standard policies limit the amount of coverage for certain types of belongings. If you own expensive jewelry, musical instruments or sports equipment, you may need to add riders to increase the coverage level for those items.

HOA and HO-6 policies must work hand-in-hand. Oftentimes, a calamity can cause damage to the exterior and interior of a condominium unit. It’s important to know the type of coverage your community carries – all-in, bare walls or single entity. This will help you determine the amount of dwelling and personal property coverage you need.

Most standard condo policies only pay actual cash value for your personal property. In other words, the insurance company will only pay a depreciated value of items such as computers and electronics. However, major carriers offer optional replacement cost coverage, which pays to replace personal property at today’s prices.

People who work from home must always carefully examine the exclusions of their HO-6 policies. Many condo policies exclude or limit the amount of payment for office equipment. If you operate a home-based business, you may need to buy a business policy to cover your office equipment and furnishings.

The takeaway

• HO-6 policies cover condominiums, co-ops and townhouses.
• Condo insurance protects your condominium unit and your personal belongings, and covers medical expenses and legal costs if a guest sustains an injury in your unit.
• HO-6 policies work in conjunction with your community’s master policy.
• The amount of coverage you need will depend on the value of your personal property and the level of coverage provided by your community’s HOA policy.

If you own a condominium, you need the protection that only an HO-6 policy can provide. Condo policies cover elements of your unit’s interior and your personal belongings, which is excluded from most HOA policies. They also come into play when a visitor sustains an injury in your condo, or if someone sues you over an incident that occurs inside your unit.

Before shopping for an HO-6 policy, you need to know the type of coverage your condominium association carries. Your HO-6 policy should compensate for whatever level of coverage the HOA policy leaves vulnerable. By carefully weighing the amount of protection your community’s HOA policy offers, against the amount of coverage you need, you can rest assured that the HO-6 policy you purchase will effectively cover your valuable home.