What is condo (HO-6) insurance?

Article Courtesy of Bankrate

By Cate Deventer

Published September 25, 2022


Your condominium is probably one of your most valuable possessions, as are your priceless personal belongings. Like standard homeowners insurance, condominium insurance can protect you from financial hardship if your condo and its contents are damaged or destroyed. Condominium insurance can also provide claims coverage if others are injured in your condo.

A condo insurance policy is a relatively inexpensive way for affordable and abundant peace of mind.

What is condo insurance?

Condo insurance, or an HO-6 policy, helps cover repair costs and financial losses arising from damages to the condo or claims against the condo owner. Condo insurance works in conjunction with a policy purchased by the condominium complex’s management, typically called HOA insurance or a master policy.

The insurance industry refers to condo insurance as an HO-6 policy. Several types of HOA insurance policies provide different levels of protection for unit owners. Since HOA policies generally only cover the complex’s common elements or shared structures, you will want to purchase an HO-6 policy to provide coverage for your specific condo and the personal belongings within it.

What does condo insurance cover?

HO-6 policies generally cover the same types of perils as homeowners insurance policies do for single-family homes, such as fire, explosions and theft. Typically, condo insurance policies include the following coverage types:

  • Dwelling: This protects the interior of your condo, including damage to elements like sheetrock and flooring.

  • Personal liability: Personal liability coverage helps cover a person’s injuries and legal fees if someone sues you over an incident in your condominium, including attorney fees, court costs and a court settlement.

  • Personal property: This helps pay to replace personal belongings, such as furniture, clothing and electronics if a covered peril damages them or they were stolen.

  • Guest medical payments: When a guest sustains an injury in your condo, guest medical payments coverage can help pay the medical bills, such as the emergency room fee, doctor bill and rehabilitation costs, up to your policy limit.

  • Loss of use: When a covered loss requires you to temporarily move out of your condo, your loss of use coverage can help pay accommodation and meal costs. If included in your policy, loss of use coverage usually pays the difference between your normal expenses and relocation costs.

It is important to know whether your policy covers the actual cash value or replacement cost of the items damaged by a covered peril. Typically a condo policy provides coverage for the replacement cost of damaged items and the cost to repair damaged interior structure elements or offers the option to acquire this level of protection. Replacement cost coverage is the broader protection as it pays the entire amount necessary to replace items. On the other hand, actual cash value only pays the depreciated value since the original purchase.
Inclusions and exclusions

While most condo insurance policies include the coverage listed above, there are typically specific exclusions from the standard coverage. Although separate policies and riders can often be purchased to offer the necessary coverage, standard condo insurance policies typically exclude:

  • Earthquake and flood coverage

  • Outdated systems or equipment that need to be brought up to code

  • Damage from leaks or sewer backup

To provide the most protection, you may want to consider these additional coverage options:

  • Unit assessment coverage: If the HOA charges an additional assessment to condo owners to pay for a covered loss, this add-on can cover a condo owner’s share of the assessment.

  • Umbrella policy: This is a separate policy that increases your overall limit of liability protection.

  • Scheduled personal property: This is additional coverage for itemized expensive items such as jewelry, furs, art, fine wine or collectibles. This is often referred to as a “floater.”

HOA insurance vs. condo insurance

HOA insurance includes two coverage types, liability and property. The liability coverage of a master policy can help pay medical costs and legal expenses if someone sustains an injury in a common area, like a clubhouse, lobby or swimming pool, but does not cover injuries sustained by guests within the walls of your condominium.

Condo management can choose between three types of property coverage:

  • All-in: All-in coverage provides the most protection for unit owners, as it covers the condo’s structure and any shared property. Additionally, it typically covers improvements you have made to your condo, like custom tile and wall coverings.

  • Walls-in: Also called single entity coverage, this provides slightly more protection than a bare walls policy. It covers the building structure and systems, along with built-in features within units, like kitchen cabinets and recessed bookcases.

  • Bare walls: This type of coverage provides the least protection for unit owners, as it only covers common areas and the building structure and its systems, like electrical wiring and plumbing. Your condo’s interior is not included.

Before purchasing an HO-6 condo policy, it helps to know how much coverage the HOA policy already provides. If your complex carries an all-in policy, you may not need to carry much dwelling coverage. However, HOA policy exclusions are also important. For example, a master policy may cover the interior structure of your condo but exclude non-standard fixtures that you add, like expensive imported tile or a custom stained-glass window.

Who needs condo insurance?

Anyone who owns a condominium or townhouse may want to consider purchasing a condo policy, and if you have a mortgage on the property, the lender usually requires it. The coverage you purchase is important, and most standard condo policies include $100,000 to $300,000 in personal liability, which you can usually increase to fit your needs. If you think you need more liability protection than a standard policy can provide, you could purchase an umbrella policy, which kicks in after you reach the liability limit of your condo insurance policy.

Most insurance companies will help you determine the dwelling coverage amount you need based on the square footage of the condo and finishes to rooms like the kitchen and bathrooms. If you want to get a ballpark idea about the coverage level you need, research the cost of construction in your area to calculate roughly how much it would cost to completely rebuild your condo, including materials, fixtures and labor. Condo owners covered by an all-in master policy may only need enough dwelling coverage to pay for losses the HOA policy excludes.

The replacement cost of your personal items should be considered as well. Standard policies usually provide actual cash value personal property coverage, which only pays the depreciated value for your belongings. But most condo insurance carriers also offer optional replacement cost coverage, which could replace your belongings at current market prices.