At the risk of stating the obvious, a condo is very different from a house. Nevertheless, both types of property must be insured. While it might seem counterintuitive that condo insurance is more complicated than homeowner’s policies, since the former is smaller, it’s actually quite true. Between dealing with the building association, the building’s master policy, and other residents, it’s not as straightforward as a simple homeowner’s policy. Check out these tips to keep in mind when shopping for your condo insurance.
1. Find Out What the Master Policy Covers First
When you pay your condo association dues, you’re throwing your money in with all the other owners to collectively insure the common areas of the building. This is called a master policy. Before you sign on to a personal policy for your own residence, investigate the terms of the master policy and find out exactly what you’re already paying for so that you don’t pay for double coverage unnecessarily. There are two main types of master policies: bare walls-in or all-in. Bare walls-in policies cover everything to do with the building’s actual structure, but nothing within the unit itself. All-in policies can cover certain fixtures inside the unit, such as lighting or flooring. Bare walls-in master policy owners will need a higher rate of individual insurance than those who hold an all-in master policy.
2. Content vs. Structure Policies
When you choose your condo insurance policy, you have to make sure your policy covers both content and structure, not one or the other. In the event of a fire, you not only want to be able to replace your rugs (content), but you also want to be able to replace your kitchen cabinetry (structure). Make sure you have a condo insurance policy that covers both.
3. Know the Difference Between Cash-Value and Replacement-Cost Coverage
Cash-value coverage factors depreciation into its payout amounts. For instance, if you were to replace a mattress five years after buying it, the cash-value policy would factor in five years of depreciation when figuring out how much money you are owed. Replacement-cost coverage does not factor in depreciation. You would get the money you need to replace your mattress with a new model today, resulting in a higher payout.
4. Natural Disaster Coverage
Does your condo insurance cover floods? What about if you have a toilet backup? While a master policy might cover flood damage to the actual building, it will not help you replace your belongings damaged by a flood. Water backup coverage is another area where residents should purchase individual policies in the case of a sewer overflow in the building.
5. Determine if Liability Coverage is Necessary
What would happen if someone sued you over damaged property caused by your guests or children? Does your insurance policy cover liability? When thinking over this type of coverage, it’s usually best to err on the safe side and get at least minimum liability coverage in case you or a family member is the cause of an accidental mishap or your dog bites someone.
It’s never a bad idea to purchase additional coverage beyond the minimal amount the condo’s master policy covers. You’ll have to consider your particular needs and lifestyle when deciding which policy to select, but the peace of mind will be worth it in the long run.