What is Condo Insurance and Why Do You Need It?

When you purchase a condo, it’s important to know what your condo association’s master insurance policy covers. You may also need additional coverage, such as loss assessment coverage. But what is condo insurance first? A type of home insurance known as condominium insurance protects policyholders from liability and damage to their condominium unit and its belongings. If you borrow money to buy your condominium, condo insurance is typically required and has several benefits.

You’ll want property coverage to protect your personal belongings and liability coverage to pay damages for bodily injuries and property damage if you’re sued. Additionally, it will help cover your living expenses while your condo is being repaired or rebuilt after a covered loss.

Property Coverage

Your condo is protected by property coverage, which helps cover the cost of replacing your personal belongings if they’re damaged or stolen. It also protects against damage to the structure of your unit, like fire and windstorm damage.

A condo association’s master policy will include different levels of dwelling coverage. These include bare walls, walls-in, all-inclusive and single entity. Bare walls policies are the least comprehensive. Walls-in policies cover the walls and floors, while all-inclusive includes the building’s systems and built-in features, including appliances and furniture.

You’ll also want to buy additional coverage for perils not covered by your master policy, such as floods and earthquakes. These can either be purchased as endorsements or as separate policies.

Another type of coverage that you may need is liability coverage. This is unique to condos and protects you if a third party sues you for an injury or property damage on your property. It typically pays for settlement, defense, and court costs.

Liability coverage is important for condo owners because mortgage lenders often require it. In addition, it’s crucial to have enough liability coverage to cover the legal and medical costs if someone is injured or has property damaged on your condo’s premises.

If your condo is damaged, you’ll need to find a temporary place to live while it’s being repaired. Loss of use coverage will reimburse you for renting a hotel room, food, and other expenses while you’re away from home until your condo is livable again.

Liability Coverage

Liability coverage is an important part of a condo insurance policy. It covers lawsuits against you if someone is injured on your property. It also helps pay for medical costs incurred by an injured person.

If you are sued for a claim, liability coverage will pay the legal and medical fees awarded in a court of law. It also helps cover costs associated with a suit, such as hiring counsel and investigating the case.

The amount of liability coverage you need in your condo insurance policy will depend on several factors, including the type of master insurance policy you have and your assets. Your insurer can advise you on how much liability coverage you need.

Generally, a master policy purchased by the condo association covers everything in the building that a unit owner does not individually own. This includes all the common areas, such as hallways, elevators, gardens, and pool areas. It also covers items all unit owners share, such as carpeting and furniture.

Some master policies will only cover common areas, while others will cover everything in the building, including individual units. Some master policies offer “bare walls” coverage, which only covers the structure of the building, and other policies cover everything in each condo, such as carpeting, cabinetry, lighting, flooring, and fixtures.

You should always compare prices and coverage from multiple condo insurers before you buy a policy. This can help you find a better deal on your condo insurance and avoid overpaying for unnecessary coverage.

Additional Living Expenses Coverage

Suppose your home is damaged by a peril covered in your homeowners or renters insurance policy. In that case, you may need to move into a hotel or other alternative living arrangements while repairs are being made. Known as loss of use coverage or additional living expenses (ALE) coverage, this coverage helps cover these increased out-of-pocket expenses.

ALE is part of most homeowners insurance policies and is also typically included in renters and condo insurance. This section of the policy is usually found under the “loss of use” section, and it reimburses you for costs you would incur if you were unable to live in your home due to a covered loss, such as damage from fire or water.

The amount of ALE coverage you are entitled to be often a percentage of your dwelling coverage, such as 20%. However, your insurer can also offer a higher level of ALE coverage called “actual loss sustained,” which increases the amount you can be reimbursed for.

You can get this ALE reimbursement for various expenses, including hotels, rental homes, and restaurant meals. You must keep track of all these expenses, including the amount you spent on them, and then submit the receipts to your insurance company for approval.

Additional Dwelling Coverage

Condos are a popular option for people looking to rent or buy a home, and they consistently rank above apartments in satisfaction surveys. Still, owning a condo can be more complicated than owning a freestanding home. The key is to ensure you have the right insurance coverage for your needs and your condo’s property.

For most condo owners, a standard homeowners policy won’t work. A homeowner’s policy is designed for single-family homes where the buyer owns the entire building and the land it sits on. For many condos, this can make it difficult to determine who should be financially responsible for damages.