One of the key differences between home and condo ownership concerns how much of your residence you have to insure. Buying a home means you own and are responsible for the inside and outside of your place, including the land it sits on. Buying a condo, on the other hand, only leaves you solely responsible (usually) for the interior of your place. The outside land, condo building structure, and building common areas are all typically jointly owned by you and your fellow condo dwellers and insured by your homeowners association (HOA).
Because condo living brings these slightly different responsibilities, it wouldn’t make much sense to arrange your condo insurance the same as you would a homeowners policy. Dwelling coverage is where the difference is most apparent. On your condo policy, you’ll likely need just enough dwelling protection to rebuild the interior of your unit. It seems logical that the Master Policy covers the building and each unit owner covers their belongings inside the condo, but it is not that simple. Master policies are subject to the Condo Association by-laws. This document is very important at time of loss. It defines what each unit consists of. For some associations, it is the interior walls all the way to the outside of the building. For others, it covers only the interior studs to the outside. The later would make the individual unit owner responsible for the floor, drywall, paint, interior trim and many other costly parts of their unit. Coverage can be purchased for “Real Property” (building coverage) that the unit owner is responsible for, but you must ask for this optional coverage.
Only a small limit (usually $1,000), is automatically provided for Unit Owners Real Property. In addition, condo by-laws allow for assessments to all unit owners in the event a loss to the buildings is not adequately covered. For example, say a major fire destroyed a building in a condominium complex. The individual building was insured for $200,000, but the cost to rebuild is $250,000. The association has the right to assess each unit owner their proportionate share of the $50,000 deficit. This type of loss can also be covered under each unit owner’s condominium insurance policy. However, the limit provided is small, usually $1,000, but the amount can be increased. It is important to know how your condo association by-laws define your unit and how the association has covered the building in the Master Policy. Our agency will gladly review your by-laws from an insurance perspective. Just give us a call.
A policy designed for the special needs of condominium unit owner-occupants to cover personal property and liability, to complement the insurance normally purchased by the condominium association for the building, structures and liability. Additional coverages are offered unit owners by many insurers.