If you’re a new condo owner, you’re about to buy, or you’ve owned a unit for years, it’s important to take a careful look at what your insurance is (and isn’t) covering. HO-6 insurance can be confusing because it’s meant to complement another insurance policy—the one your condo association or HOA already provides. Today, we’ll address the basics of what it takes to insure a condominium so you can rest assured that your home and belongings are well protected, come what may.
What is HO-6 insurance?
Designed specifically for condo owners, an HO-6 policy offers coverage for your individual unit, as well as personal liability and additional living expenses coverage. To understand exactly what you need your HO-6 to cover, first take a look at what your condo association/HOA is already covering through their “master” insurance policy. Coverage offered by a master policy may overlap in some areas with your HO-6.
What does a condo association or HOA master policy cover?
When you buy a condo, you will likely become part of either a condo association or homeowners association (HOA). Members will be required to pay recurring dues, some of which are allocated to a master insurance policy. The master policy, in turn, offers its members some property and liability protection.
Master policies can be tricky because they can vary; some are much more comprehensive than others. Some policies will offer minimum coverage and only protect the common areas you share with your neighbors—such as hallways, elevators, pool areas, gyms, etc. Other policies may help cover your individual unit. “Bare walls” and “all-in” are two types of master policies you may come across.
“Bare Walls” Policy
This type of policy typically covers the structure of your building, as well as common areas and spaces owned by the HOA or condo association. If you have this type of policy, you’ll need to insure everything inside your condo yourself.
All-in policies are less common and much more comprehensive. In addition to everything a bare walls policy offers, an all-in policy covers fixtures (like appliances and countertops) inside your unit and any upgrades or modifications made by you or a previous owner.
Be sure to do some research and speak with your condo association so you understand exactly what your master policy covers and what you are independently responsible for. You can then fill in any gaps with your HO-6 policy and additional coverages to protect you if you lose anything in or around your unit.
What does my HO-6 condo insurance need to cover?
Once you understand what your master policy covers, it’s time to supplement your coverage with an HO-6 policy. The four main types of coverage provided by an HO-6 are
- Personal property (inside and outside the unit)
- Dwelling (for interior walls and permanent fixtures)
- Personal liability (for legal expenses for claims brought against you)
- Loss of use (for additional living expenses if your unit becomes uninhabitable)
- Loss Assessment (for your share of a loss to property owned in common by all members of your property association)
Your personal property insurance should cover all of your personal belongings, such as clothing, electronics, furniture, etc. If your belongings are destroyed or stolen, your insurance will reimburse you up to the limits of your personal property coverage. Protection may extend to property outside your home, such as in your yard or vehicle.
The amount of dwelling coverage you need in your HO-6 policy will depend on how much your community’s master policy already covers for you. If you have “bare walls” coverage, for example, you’ll need to supplement it with dwelling coverage that protects everything inside the walls of your unit.
To determine this, you’ll need to calculate your home’s replacement cost by taking its square footage and multiplying it by local rebuilding costs. You can use an online replacement cost estimate tool or ask your insurance agent to calculate this number for you. Keep in mind that additions, areas that have been remodeled, and updates that increase your home’s value will affect the replacement cost.
Your coverage limit should equal the cost of replacing everything in your unit if it’s damaged or destroyed by a covered peril. Depending on your policy, covered perils may include
- Strong winds
- Hail damage
Damage caused by flooding, mudslides, sinkholes, and earthquakes typically aren’t covered in standard policies. If you live in an area prone to any of these disasters, look into purchasing additional insurance.
If you or a family member is sued for injuring someone or damaging someone else’s property, personal liability insurance will help cover costs. Legal fees and medical bills can cost hundreds of thousands of dollars. So it’s imperative that you have enough liability coverage to avoid paying out of pocket.
We recommend $300,000 of liability coverage minimum for most homeowners; however, many insureds find more peace of mind choosing a policy with at least $500,000 of coverage. If you want to increase your liability insurance beyond your condo policy limits, ask your insurance agent about adding a personal umbrella policy.
Loss of Use
If your condo becomes uninhabitable and you’re forced to live elsewhere temporarily, loss of use coverage (also known as additional living expense coverage) will reimburse you for costs that exceed your normal standard of living. For example, if a tree falls on your home and you’re displaced for a month while it’s being repaired, loss of use coverage will reimburse you for staying in a hotel.
If there’s a fire in a shared space, such as a hallway or lobby, and the cost to repair the damage exceeds the limits of the master insurance policy, you and other members of your property association will be held financially responsible. This is where loss assessment insurance comes into play; it will help cover a shared loss (for any covered perils). It can also help cover uncovered property or liability claims.
Have any general questions about HO-6 insurance? Or would you like to purchase a new policy to cover your condo? Message us online or give us a call. You can also request a quote online, and we’ll be in touch with you ASAP. We work with multiple top-rated insurance companies nationwide. We’d be happy to find you the best coverage at the lowest price.