Insurance for a Condo or a Townhome

As the real estate market continues to churn along, some of my experiences have been providing insurance for  a Condo or a Townhome. The typical insurance policy for this type of dwelling differs from that of a single family residence in a few ways. Most of these properties are part of a larger building which is connected to the unit to be insured. Residents need to understand what a “walls in” policy is and how much coverage they need to get in order to be properly insured.

Your homeowners association or HOA generally collects monthly dues that can include insurance for the condo's building exteriors and common areas. To find out what that includes, review the association's bylaws or the master insurance policy.

There are two types of coverage your HOA's master insurance policy may provide:

  • Bare walls in
    • This would only cover the exterior structure of the building, so you would be responsible for insuring all the interior contents in your home including appliances, personal belongings, bathroom/kitchen fixtures, flooring, etc. if there was a loss.
  • All in
    • These policies can protect the exterior and structural interior contents of the building with the exception of your personal property.

After you determine what your HOA's master insurance policy covers and which parts of the condo you're personally responsible for, you can get a better idea of how much coverage you may want.

Your Condo/Townhome insurance policy should cover all things not included in the master policy:

  • If your HOA has an "all-in" policy, it generally does not include improvements you make to your unit. You would need to purchase additional insurance to cover renovations, remodeling, etc.
  • If your HOA has a "bare walls" policy, determine the amount it would take to replace all of your condo's interiors. This could include lighting, flooring, cabinets, etc.

Condo/Townhome insurance can cover your personal items too if they are ever stolen, damaged or ruined (in a covered loss). It’s easy to underestimate the value of your personal property, or forget to include things like clothing, furniture, appliances, electronics, etc. A full home inventory can help you make sure you’re not under insured, and avoid future frustration.

It’s also important to include unique or expensive items, like jewelry, artwork, musical equipment and more. Your Condo/Townhome insurance may only provide low coverage limits for these valuable items.

What if your dog bites someone? What if someone were injured on your property? If you’re ever found responsible or liable for damages, your assets, investments, and future could be at risk. Unfortunately lawsuits are common, but your condo insurance policy may provide liability coverage. Is it enough though? Consider your net worth, available assets, and your own need to cover yourself from liability issues.

If your condo were ever damaged, and you couldn’t live there while it was being replaced or repaired (and let’s hope that never happens) would you be covered to live somewhere else? Without considering these additional costs into your condo insurance, you could find yourself unable to live in their homes after a loss, and stuck paying out of pocket for basic living expenses.

Make sure to talk to an experienced insurance agent who can help you navigate the waters and will also satisfy the lender requirements should you be obtaining a mortgage.