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How much condo dwelling coverage do I need?

Fact-checked with HomeInsurance.com

In many ways condo insurance (also known as HO-6 insurance) is trickier than a standard home insurance policy. Not only do you need to speak with your lender, but you also need to speak with your HOA. Your HOA has its own policy, which you help pay for with your monthly dues.

What do you need to know about condo insurance before you start shopping? How do you answer the question, “How much condo insurance do I need?” Keep reading to find out what. 

How much dwelling condo insurance coverage are you responsible for?

Your condo’s HOA has what is known as a master policy. The master policy usually insures common areas (such as a picnic area) and outside walls, but it may insure more.

There are two types of master policies for HOAS:

  • Bare wall-in master policy: Also known as a studs-out policy, these cover the exterior walls of the condo. Condo owners are responsible for everything on the inside
  • All-in Master Policy: This policy covers both the interior and the exterior of your condo. Condo owners are responsible for their belongings.

Figure out what type of policy your HOA has before you start shopping, as this will tell you what type of policy you need to get. Most HOAs usually opt for bare walls-in because it is cheaper.

How do you estimate the amount of condo insurance coverage you need?

To calculate how much insurance you need, let’s assume your condo only has a bare walls-in policy (because this is the most common for HOAs). In which case, you will want to go through the following steps.

Assess how much you have in personal belongings

If you were to add up the value of all of your possessions, how much protection would you need? How much do you own in jewelry? How big is your wardrobe? What did you pay for your couch? You need a personal property limit (aka dwelling coverage) high enough to replace all of your possessions in the event of a total loss.

Calculate how much it would cost to repair or replace the interior of your condo

This is easier said than done, but start by asking your HOA for further guidance. What do other unit owners purchase?

Your insurance company will calculate what is called replacement cost value. In most cases an agent will take care of this for you. To do this, he or she will look at things like:

  • Building permits
  • County fees
  • Current cost of building materials
  • Debris removal
  • Interior finishings
  • Labor costs
  • Siding type
  • Square footage

Another option is to contact an architect or contractor and get a quote. They won’t be able to give you an exact price, but they’ll get you close.

Lastly, if you have a mortgage, your lender will likely require you to have a set amount of coverage. In this case, the easiest thing to do is call them and ask. Some lenders, for example, require 20 percent of the condo’s value. If your condo is worth $500,000, you would need $100,000 in coverage.

Determine the total value of all of your assets

Think beyond your condo. What is the total value of your car, your stocks, your bank account and your 401K? The reason you need to do this is simple: liability.

Should someone hurt themselves on your property, they may sue you. Whatever liability insurance you purchase should be enough to cover all of your assets. Excessive or not, lawsuits tend to revolve the total value of someone’s assets. If you have over $200,000 in assets, your liability coverage should be for that much as well.

Calculate how much it would cost to rent a similar condo for a year

If your home is destroyed or badly damaged, you will need to find somewhere else to live while it’s being repaired. This is what insurance companies call additional living expenses. To be fully covered, look for a policy offering a loss of use coverage for up to 12 months. This may seem like a long time, but contractors have busy schedules. You’ll need all of the time you can get.

Currently the average cost for a 1-room apartment in the U.S. is $1,234.43. Spend that much for 12 months, and you’ll need $14,813.16. 

How do you update your dwelling coverage?

You’ll need to routinely update your dwelling coverage as time goes by. There are a few reasons for this.

If you’ve renovated your condo (meaning you’ve updated your kitchen or bathroom), the cost to repair those rooms in the event of a covered peril will be more.

If the cost of living goes up, you’ll need to update your loss of use coverage, too. Keep an eye on the average rent in your town or city.

Lastly, keep an eye on labor costs and building materials. If the cost of lumber goes up, as it is apt to do after a large-scale disaster, consider increasing your policy limits to reflect any changes if those prices don’t fluctuate afterwards.

What is dwelling coverage and what does it do?

Dwelling coverage is much like renters insurance in that it pays to replace your possessions should they be damaged in a covered peril. Typically, a normal condo insurance policy does not cover your personal property, so this type of protection must be purchased separately.

Dwelling coverage has limits for each category. Therefore, even if you purchase a policy with $25,000 in personal property protection, that does not mean that the $25,000 would cover everything you own even if it’s more than enough. Most policies have caps on what they’ll pay for categories like jewelry and clothing. Therefore, it’s possible you would only receive $2,500 for a $10,000 necklace. Speak with an agent about your needs if you have a lot of valuable property you want to insure. You’ll likely need to purchase additional protection.

This coverage comes with exclusions. For most personal property protection plans, floods, sinkholes and earthquakes are not covered. If your condo is in an area prone to flooding, for example, purchase flood insurance too. You can do so on your own at Flood Smart (the National Flood Insurance Program), but your insurance company may act as a liaison for you if you’re interested.

The takeaway

  • Determine whether your HOA has a bare walls-in or all-in master Policy.
  • Calculate your assets for liability.
  • Research how much nearby apartments cost for loss of use coverage.
  • Routinely revisit your policy once a year to determine if you need more coverage.
  • Get dwelling coverage no matter what type of master policy your HOA has.

Don’t rush choosing a condo insurance policy. Go through each step outlined above to choose the best policy. Speak with your neighbors, your HOA and possibly a nearby contractor. Get their advice and use your best judgment.

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