Condo Insurance Questions You Should Be Asking

A condo differs from a house in several important ways. First, a condo usually doesn’t have a yard or a basement, so you don’t have to worry about keeping up the lawn or plowing the driveway. Condos and houses also differ when it comes insurance. Usually, condo owners only have to insure part of their property on their own. To make sure that you have adequate coverage, you should ask the following six questions.

1. What does your master policy cover? When you live in a condo, you own your individual unit and share collective ownership of the rest of the complex with the other condo owners. This means that condo owners have a collective responsibility to insure the common areas, such as the pool, hallways, building exteriors, etc., and the condo association collects monthly dues to pay for this insurance. Your master policy should explicitly say what areas of the complex are and are not insured by association dues.
2. How much is the condo association deductible? Your condo association will usually have commercial insurance coverage for shared building and common areas. These policies come with an association deductible. Thus, if a disaster struck your complex, this deductible would be split among the unit owners. This is not a major concern if the deductible is only $5,000, but some deductibles can range up to $50,000.
3. How much coverage is needed? After you know what parts of your condo you must insure on your own, you need to decide on how much coverage is appropriate. To estimate the coverage you need, pay attention to how much other unit owners are paying for recent upgrades, such as new cabinets, flooring, or countertops. You might also take about half the market value for interior structures to estimate your coverage needs.
4. Cash value vs. replacement cost coverage? The difference between these two coverages is massive in some cases. Cash value coverage reimburses you only for the present cash value of the item less depreciation. Replacement cost coverage reimburses you for what it would cost to replace the item with a new model. For instance, if you lost a TV that was three years old, cash value coverage would only give you what the TV is worth today, which might be next to nothing. Replacement cost coverage would pay for you to buy a new model.
5. Did you insure interior structure and contents? When getting condo insurance, you need to get coverage for both your personal belongings and the actual structure of the building. Remember that you only have to insure the structural items for which your condo association’s master policy holds you responsible.
6. Do you have flood and wind coverage? If you are in a flood zone, your mortgage lender might require you to have flood insurance. Wind coverage is typically included in a standard condo policy, but, if not, you can obtain wind damage coverage from the state’s wind pool association. Wind coverage will help you pay for damages caused by hurricanes and other wind-related disasters.

Additional Resources:

• What Type of Insurance Do I Need for a Co-op or Condo?
• Insuring Your Co-op or Condo