3 Things You Need to Review On Your Condo Policy (HO-6) ASAP

In the insurance world, condo or unit-owners are in a totally different arena from owners of a single family dwelling. To start, unit-owners are buying property that is attached to another unit-owners property. As you can imagine, insuring a condo, townhome, or apartment is totally different than insuring a single family dwelling. 

Single family dwellings are insured under an HO-3 or an HO-5 policy. Without getting too deep in the weeds, these policy forms are designed to cover the entire structure, attached structures (porches, decks), detached structures (fences, garages, pool houses, sheds), and the owner's personal property. 

Condo or unit-owners policies (HO-6) are designed to cover the unit from the dry wall in and the owner's personal property. Everything from the dry wall out is covered under a community association's master policy. Example: a windstorm that causes damage to the building's roof is covered by the master policy. A water leak that causes damage to the floor of a unit is covered by the unit-owner's HO-6 condo policy. 

A Few Things to Be Aware Of With Your HO-6 Condo Policy:

• Building Coverage- Unlike a homeowners policy (HO-3 or HO-5), the estimated replacement cost of your unit is somewhat up to interpretation and agents and brokers do not typically rely on computer software to calculate the coverage needed. Here's a couple of things to consider when reviewing your building coverage on your HO-6 Condo Policy:
  • What does the master policy say? - In a total loss scenario (like if the building burned down), the master policy will work in conjunction with your HO-6 policy. In the master policy, it will state whether that policy pays to rebuild a blank shell (just studs and sub flooring) or it may pay to rebuild the unit as it was originally constructed (it will include similar original floors and cabinets but will in no way pay for any improvements or betterments made of the years). Depending on the language in your association's master policy, you may need to increase your building coverage.
  • $50 per square foot rule - A good rule of thumb to consider is $50 per square foot. If you have an average condo and it's $1,500 square feet, you will need at least $75,000 of building coverage. If your condo is more upscale or if your association's master policy is just going to give you a blank shell to work with, this may need to be increased to $75 or even $100 per square foot. 
• Loss Assessment- The loss assessment coverage on a condo policy needs to be higher than most HO-3 or HO-5 policies. What does this coverage do? As a unit-owner in a condo community, you are required to pay for things that are not covered under the association's master policy. For instance, if there are several storms in a given year and there have been multiple claims filed on the master policy to fix damages in a common area, like a pool house, then there is a good chance that the master policy limits will be exhausted. Once they are, the association turns to the unit-owners and charges a loss assessment to pay for the remaining work that needs to be done. This could equate to $500 per unit or it could be $20,000 per unit, depending on the situation. Unit owners need to make sure they have more than the base coverage of $1,000 or $5,000 on their policy or they could end up in a bad situation financially.
• Personal Property coverage- With an HO-6 policy, unit-owners can essentially cover as much or as little of their personal property as they want because they have the option to choose their limit for personal property coverage. To make sure your coverage is sufficient, calculate how much you think it would cost to replace everything in your unit- clothes, furniture, everything in your cabinets, everything in your drawers, etc. 

These are just a few differences between a traditional homeowners policy and a condo or unit-owners policy. At the Roberts Insurance Group, we make sure all of our clients have sufficient coverage by reviewing with them, in depth, to make sure their policy works just the way they want and fits in their budget. 

Give us a call today at 678-250-8133 to make sure you're properly covered!

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