The needs of condominium owners differ from that of homeowners, and the differences can be quite confusing. Generally speaking there are three approaches to homeowners insurance for condos: Bare Walls Coverage, Single Entity Coverage, and All Inclusive Coverage.
Here is a quick summary of all three approaches:
Homeowners insurance for condos option #1: Bare Walls
Under a "bare walls" approach, only the bare structure of the building is covered by the dues you pay to the condominium association, which usually consists of: the structure, fixtures, and furnishings of collectively owned areas. Collectively owned personal property of the association is also covered, such as poolside or lobby furniture. This approach means that individual unit owners are responsible for insuring building property they own and use exclusively, such as sinks, built-in cabinets, appliances, flooring, and wallpaper – in addition to any upgrades or improvements they make in their individual units.
Homeowners insurance for condos: option #2: Single Entity
A "single entity" approach means the condominium association master policy covers virtually all real property in a residential condo, including fixtures in individual units. This coverage does not usually cover structural improvements, betterments, or additions that the individual unit owner has made on their own. Single entry coverage means a unit owner is responsible for covering only personal property on the Unit Owners Form, as well as any improvements or upgrades made on their own behalf.
Homeowners insurance for condos option #3: All Inclusive
With "all-inclusive" or "all-in" coverage, the condominium association’s master policy covers all real property in a residential condominium structure, including fixtures in individual units and any structural improvements, upgrades, or additions that the individual unit owner has made. In the event of a catastrophic loss, all-in coverage extends to replacing a unit to the condition it was in at the time of the loss. All-inclusive master policies indicate that the unit owner is responsible for covering only his or her personal property listed under the Unit Owners Form.
From an insurance provider’s point of view, all unit owners share a collective responsibility for insuring common areas such as the building exteriors, hallways, and common-use areas like the pool or exercise room. The association uses a portion of monthly dues from unit owners to insure these common spaces and features. Reviewing a copy of the association’s master insurance policy will clarify what is covered by your monthly dues, versus what you are required to cover in your homeowners insurance. The coverage will likely differ a bit with each complex so be sure to take a closer look to understand what you’re specifically liable for.