We are all well aware that liability car insurance is mandatory. Homeowners insurance is mandatory as long as you have a mortgage to pay off. And even after that, it’s always highly recommended to keep. However, renters insurance is not mandatory, though it’s also a good idea to obtain it. Since a condo lies somewhere between an apartment and a house, are you obligated to get condo insurance?
When you take out a mortgage, whether for your house or your condo, the lender requires that insurance be held on the property. This is to protect the bank’s interest in case something happens to the property. So in a sense, getting insurance is mandatory (unless you own your place outright).
Now, this does not mean that you can just get a homeowners insurance policy for your condo. We wrote a previous article that broke down the differences in condo insurance and homeowners insurance. There’s also something called a Condominium Association and is similar to a Homeowners Association. Policies will differ from complex to complex, so be sure to look at it thoroughly before shopping around.
In the condo association policy is something called a Masters Policy. There are two different types. One is called “Bare Walls-in” and covers all real property from the outside in. It does not cover fixtures or installations within the unit, such as granite countertops and wood flooring. The other type is called “All-in,” which covers fixtures, installations, and additions within the interior. Variations of these types can vary from building to building, so be sure to read the policy carefully, to know exactly what is covered and what you need to cover yourself.
Most condo owners need insurance for just their unit. The “common” areas, such as the pool and hallways, are typically covered through monthly fees by the Condominium Association. This is usually called commercial insurance and will have a deductible. The coverage should be spelled out in the policy. Once you’ve figured out which parts of the condo unit you must insure yourself, you can figure out how much coverage to acquire.
You’ll also need to decide if you want cash value coverage or replacement cost coverage. What’s the difference? We actually define these terms in part of our Insurance Cheat Sheet. One gives you the money that you spent on an item originally, while the other gives you the money to replace it at current cost. You’ll also need to insure both contents and structure. Contents include things like furniture, electronics, and valuables. Structure includes entities like flooring, countertops, and lighting.
Also, make sure to check into your Masters policy to see if you’re already covered for wind or flood damage. Typically these are covered under your Condominium Association policy, but you’ll want to make certain. And if you’re not, you’ll need to decide if you want to add that to whatever policy you do get.
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