A condominium is a huge property complex that's sold and divided in individual units. They're particularly popular in areas that feature high property values, for instance vacation hotspots.
Condominiums are more than apartments but differ from houses. This means that condo insurance is slightly different than other forms of insurance and is typically accompanied by a homeowners association (HOA) policy.
When it comes to insurance, rules vary from complex to complex, so it's important you consider these factors before insuring your condominium.
1. What the Master Policy States
Owners of condominiums don't own the entire complex. They typically own their unit outright and share ownership of the remaining complex with other owners.
From an insurance perspective, that implies all unit owners have a joint responsibility for insuring the mutually owned areas of the complex-hallways, building exteriors, the pool area etc.
A condominium association usually obtains monthly dues from owners and uses a segment of the funds to insure common areas. Meanwhile, as the unit owner, you're typically responsible for insuring everything within the walls of your unit separately.
Ensure the master policy and association rules spell out the parts that are insured via association dues and those that aren't. The two kinds of master policies are:
The policy covers installations, fixtures, or additions within the internal surfaces of the floors and perimeter walls.
The policy covers property from the external framing inward, but doesn't cover the installations and fixtures such as flooring and kitchen fixtures within the unit.
2. The Worth of Your Personal Items
Condominium insurance can cover your personal belongings in the event of theft, damage, or ruin (in a covered loss). Consider a home inventory to understand the full worth of your personal items.
You'll discover how easy it is to underestimate the worth of your personal items or forget to include items such as furniture, clothing, and appliances.
Nevertheless, a full inventory can help ensure you aren't underinsured and prevent future frustration. You should also include expensive or unique items such as artwork and jewelry.
3. How Condominium Insurance Works
The HOA or master policy will cover damage to your condo grounds, building, or other exterior features. Therefore, your policy needs to cover your personal items and appliances. In case of a covered loss, for instance fire or burglary, you'll have to file a claim with your insurance provider or condo association's insurer.
4. The Appropriate Coverage
Owners usually ask this question after their purchase. Once you've established the exact parts you wish to insure in your unit, you must establish the amount of coverage to acquire. You can estimate coverage by establishing the amount paid by other owners for recent upgrades, for instance new cabinetry and flooring.
You can also obtain a rough estimate by conducting an inventory of your personal items and establishing what it would cost to replace your items after fire or a burglary.
Bear in mind that some valuable items may require additional or special coverage. It's important you check whether you've set your total limits high enough and whether any item surpasses the "per-item limit."
5. The Cost of the Association Deductible
Condominium association insurance usually includes commercial coverage for the jointly shared building and common areas. Such policies usually feature an association deductible.
In case of a hurricane or natural disaster, the policy spells it out. If the association requires major work or major damage has occurred on the structure, the association will tender the claim to its commercial insurer and it would obtain coverage for its loss. However, a deductible would be present and would undergo evaluation against every unit owner.
6. Replacement-cost or Cash-value Coverage
Once you establish the suitable coverage amount, you'll have to establish the amount of coverage to buy. You must choose between two basic groups: replacement cost and cash value.
Cash-value coverage merely replaces the worth of the insured item without depreciation. When it comes to actual cost-value insurance, there's depreciation depending on the age of your items.
Condominium insurance covers your belongings in case of a loss and protects policyholders against liability claims if they're responsible for another party's injury or property damage. If you're contemplating a purchase, this guide will prove invaluable.