When purchasing Condominium or Townhome Insurance (sometimes referred to as an HO-6 policy) in a multi-unit structure, you need to first review and understand the Associations’ Covenants, Conditions, and Restrictions. (CC&Rs) Particularly, the insurance section that states what the Association coverage handles, and what the Unit Owner is responsible for. Based on this, the Association’s Master insurance policy will either be:
- An “all-in” condo master policy: Also known as a “single-unit” master policy, this type of policy covers the fixtures in your condo such as the appliances, wiring, plumbing, and carpets, but does not cover personal property that you own.
- A “bare walls-in” condo master policy: (most common) This policy does not cover anything contained within your walls. It may or may not cover your condo’s plumbing and electrical systems. Be sure to carefully review the association’s master policy to determine what your condo insurance policy needs to cover.
If you determine that your Association is a “bare walls-in” situation, you need to consider what built-in Building/Dwelling (aka Additions & Alterations) amount is needed for carpet, hardwood floors, tile floors, kitchen cabinets, plumbing and electrical fixtures, built-in appliances, window treatments, unit owner improvements, etc. You’ll need to establish a coverage amount for all of this that you are comfortable with. ($50K, $100K, $250K, more?) Insurance agents may have internal calculators to help estimate these figures, but they are ballparks, so ultimately the buyer/owner needs to be comfortable with the final figure being a maximum if there was to be a total burn down of the unit.
Contents coverage or Personal Property coverage is the next important figure to establish. Calculate a ballpark estimate of the value of your loose Personal Property, such as furniture, loose appliances and electronics, art, clothing, shoes, etc. Consider jewelry too, but higher levels of jewelry may need to be covered by “scheduling” for added premium cost. Adding all of this up can be difficult, but if you were to add up what you paid for all these items, the figure is probably higher than you first guess. Make sure “replacement cost” is added for this so there is no depreciation in event of a loss.
Liability coverage is included, which protects you and covered members of your household when you’re responsible for bodily injury or property damage to others. In addition to paying settlements to injured parties, HO-6 liability insurance covers the cost of defending you from lawsuits and can include libel and slander. This coverage is typically shown at $300K or $500K, and then Umbrella Liability policies can be purchased to give much higher levels of this coverage above what is on the HO-6 policy.
Next you will see Loss of Use coverage that pays out when your unit becomes uninhabitable due to a covered loss/event so you can have similar shelter until repairs are completed. For Rental condos, this may show as Loss of Rents. Make sure that this coverage is sufficient in the quote/policy or ask to buy up more.
An important endorsement to have added on is some coverage for Water/Sewer back-ups, as this is not normally included.
Finally, a very important coverage that needs to be increased up to a high level is Loss Assessment coverage. Often, the max is $50K, and well worth a small added charge. Loss assessment coverage protects condominium owners from having to pay out of pocket for special assessment claims that exceed the coverage of their HOA’s association’s master insurance policy limits, or to cover a high deductible in the master policy, which has become very common.
Vice President – Personal Insurance I CREST Insurance Group, LLC
Denver High-Rise Living is proud to partner with local condo experts to ensure our clients have all of the information needed to make educated decisions during the condo purchasing and sales process. Please contact us with questions so we can assist you and connect you to one of our partners. We’d be honored to represent you in the process as well! Denver High-Rise Living