For some of us, owning a condominium is the perfect balance of investment, security, and ease of living. When the Condo Association takes care of mowing, weeding, snow shoveling, outdoor maintenance, siding, roofing – everything that’s “studs-out” – it takes a lot of work and worry out of home ownership. Buying a vacation condo as an investment property can be a great way to expand your investment portfolio, and have a place to get away from it all. While condo ownership has many benefits, there are also a few condo-specific risks to be aware of. Thankfully, just like with most things, there’s an insurance policy for that!
Studs-in vs. Studs-out
With a typical Homeowners Insurance policy (most commonly called an HO-3 or HO-5 in insurance lingo), your Coverage A amount is calculated as the cost to completely rebuild the entire home in the event of a total loss. Condo Insurance comes on a form we call HO-6, and its Coverage A is calculated as the total cost of all walls, flooring, cabinets, windows, etc. from the studs of the condo unit into the condo itself – the parts of the building you own. This “studs-in” value may be more or less than your purchase price or loan amount, depending on the finishes inside the condo and any upgrades that you make to your unit.
The Condo Association is responsible for every part of the building that they own that is “studs-out” from all individual units. This can include public walkways, foyers, community gathering spaces, hallways, docks, pools, and all exterior siding and roofing. The Condo Association has their own insurance for this, and that policy can affect what you need on your policy, as we’ll see further down.
A Through F, But Never B
With a Condo Insurance policy, your Declarations Page will look very similar to a Homeowners Insurance policy, with a few exceptions due to the nature of condo ownership. Coverage A we’ve already discussed above. Coverage B, Other Structures, isn’t included, because the Condo Association owns all the things we’d count as Other Structures on a Homeowners policy. Coverage C, Personal Property, is for all the contents of your condo that aren’t part of the structure – clothing, furniture, books, kitchenware, electronics, etc. Coverage D, Loss of Use, provides funds for living in a hotel or apartment if your condo unit becomes uninhabitable due to a covered loss. Coverage E, Personal Liability, covers damages that you may be responsible for to other people or their property. Because you’re in close proximity to many other units in your condo building, we recommend higher limits here. Coverage F, Medical Payments, provides coverage for minor injuries to visitors in your home.
The Hidden Hero – Loss Assessment
Loss Assessment is one of those coverages that most insureds aren’t even aware of within their Homeowners or Condo Insurance policy. Loss Assessment limits can range from $1,000 to $50,000, and the cost is usually less than $10 per year for a $50,000 limit. This coverage has one specific purpose, to cover your portion of the HOA’s or Condo Association’s deductible for their covered loss. Remember from above, that your Condo Association’s insurance will affect your own? This is why. The insurance that the Condo Association carries for their property can have a deductible of $1 million or more, and if they have a claim, like hail damage to their roof, they will expect each condo owner to pay a portion of it.
We’ve mentioned many times lately how insurance rates, restrictions, and deductibles are on the rise, and this applies to Condo Association insurance policies, as well. Your association may be looking at a much higher deductible for their next renewal, and you want to be prepared. Considering how low the cost is on your own Condo Insurance policy to increase Loss Assessment to the maximum, it’s an easy decision to make.
Insure With the People You Trust
If you have a condo insured with us, whether as your home or as a rental, please email Anne or call her at 573-442-1105. She’ll review your current Loss Assessment coverage and do a quick quote for increasing it to the maximum limit of your policy. The agents at Kasmann Insurance take pride in helping our insureds navigate the ever-changing world of insurance. Whenever you have a question about a policy, renewal, or specific coverage, we will be happy to help. Thank you for your continued business and continued trust.