Atlanta has been growing in a lot of ways. The film industry is booming. Business is flourishing. Amazon might consider us as a contender for their second headquarters. And something else that’s increasing in the city? Condo sales. According to a Curbed: Atlanta article, Midtown’s condo sales are up, with 1,450 resales in 2017 and a ratio of list-to-sale prices of 99%. Most units spend less than a month on the market (28 days, actually.) Now, that’s all fine and good, but if you own a condo or you’re one of the many thinking about getting one, you have to consider something other than location and number of rooms.
Yup. We’re talking about condo insurance. Now, condo insurance can get a little tricky, but we’ll explain what condo insurance is, what it covers, how much you need, and how much it costs.
What is condo insurance?
Insuring a condo is different than insuring a house, which is why they invented condo insurance. Specifically, the form is called an HO-6 policy. The issue is that as the owner of a condo unit, you don’t own the land and property or the building itself. You do, however, own the inside of the condo, meaning the appliances, furniture, cabinets, lighting plumbing, electrical wiring, and so on.
Basically, you own the inside of your unit, minus the floor, walls, and ceiling. Yeah…we understand that it’s confusing.
Bear with us:
The reason this matters is that the condo association (we’ll call them the COA for simplicity’s sake) has their own master policy that covers the building itself and any common areas, like hallways, pools, tennis courts, and the lobby. That policy, however, does not extend to the inside of your condo unit.
Hence the invention of the HO-6, or condo insurance.
At any rate, it’s vital that you understand your association’s master policy so you can see what is and is not covered.
What does condo insurance cover?
Now. As far as what types of losses are covered by condo insurance, fire and smoke, wind and hail, theft, vandalism, lightning, and burst pipes are usually covered. As far as the unit itself, the condo insurance policy will cover a few different things:
1. Damage to the unit’s interior.
As we mentioned before, you own the inside of the unit. Condo insurance will help cover losses to the inside of your home, like if you have a burst pipe. However, this is where you really have to review the COA’s master policy.
- If the master policy is all-in, it will cover all original items built into your place (for example, cabinets, lighting, fixtures, plumbing, and wiring.) So, you wouldn’t need coverage for those things. But take heed: it won’t cover things that aren’t original to the unit. Any additions or alterations (like new floors) will need to be covered by your personal condo policy.
- If the master policy is bare-walls, that means you have to insure everything besides the floor, walls, and ceiling. Nothing’s covered besides the bones of the unit.
2. Your belongings.
Your personal possessions won’t be covered by the COA’s master policy. That means that if you have a fire or a burglary, your clothes, furniture, electronics and other treasures would not be covered. But your personal condo policy provides coverage for your belongings so that you won’t end up facing a major loss.
Pro tip: Insure your personal belongings for their replacement cost, not their Actual Cash Value (ACV.) Replacement cost (RC) allows you to replace your belongings at today’s prices, unlike ACV, which reimburses you for the value that your belongings were worth at the time of the loss.
3. Your liability.
If a guest gets hurt in your unit, your condo insurance can help cover their medical expenses and the legal expenses if they choose to sue.
4. Additional expenses.
When a disaster strikes, you may not be able to live in your condo while the repairs are being done. If it’s a covered loss, your policy may cover you for “additional expenses” that you accrue because you had to live elsewhere (for example, hotel bills and restaurant bills.)
5. Loss assessment coverage.
Let’s say there’s a big loss to the condo building. It’s a big enough loss that it goes above the COA’s master policy limit. Each condo owner may need to assist with the expenses that are left after the policy is exhausted. If your personal condo policy has “loss assessment” coverage, the potion you have to pay might be covered in part or in full.
What does the COA’s master policy cover?
We touched on this briefly before, but let’s just recap quickly. The COA’s policy will typically cover…
- The building’s exterior
- The common areas (ex. The lobby, pool, gym, elevators)
- Liability for common areas (ex. Someone falls in the lobby and is injured)
Again, it’s essential that you understand what your particular COA’s policy covers. Every policy is a little bit different, so don’t assume something’s covered by the master only to find that it’s not.
One way you can start figuring out what the COA’s policy covers is by carefully reviewing the COA’s by-laws. The by-laws are basically the rules and regulations of the COA, and they often list very useful information, such as the COA’s insurance deductible. It’s a good idea to review the COA’s by-laws (which you might find on the association’s website or simply by asking to see them) before you close on the condo to make sure you’re comfortable with all of the rules and expectations. And this is also a good chance to check out the insurance situation.
Actually, let’s dive a little deeper into the topic of the COA’s deductibles – more specifically, their water damage deductible…
Water damage, the COA policy, and your condo policy.
Be sure to find out how the COA’s policy treats water damage. Find out what’s covered and what’s not – since you’ve got neighbors all around you and water damage in one unit can often affect several, it’s important to know. What’s covered? What’s not covered? What would you be responsible for if, say, your washing machine spontaneously decided to flood your unit…and the units below and next to yours? As you can imagine, water damage often becomes a big mess in more ways than one.
Another important consideration is whether the COA’s policy has a “per-unit” deductible for water damage. Let’s say they have a $10,000 per-unit water damage deductible. That means that the COA’s policy will only cover damage exceeding $10,000, so the resident of the unit is usually responsible for any damage until that $10,000 kicks in. And imagine if your washing machine’s mishap also affected your neighbor’s unit. You could be on the hook for covering not only your expenses but theirs as well.
So. We know this is a lot of information, but water damage is extremely important to consider when you’re getting your own personal condo insurance and figuring out what coverage you need and what’s already covered by the COA’s policy.
How much condo insurance do I need?
To figure out how much condo insurance you need, you have to factor in all of your belongings and the expenses of repairing or replacing the inside of the condo.
Taking a home inventory is a helpful way to get to this estimate. You have to take into account…
- Your belongings
Pro tip: It’s important to get advice from a trusted insurance advisor because COA policies and state laws vary widely. An experienced insurance agent can help you evaluate how much condo insurance you need to protect your home.
What losses are not covered by condo insurance?
There are a few things that are not covered by condo insurance. Wear and tear will not be covered. Earthquakes and flooding are also not covered – you would have to purchase separate policies to protect yourself against these losses (you can get flood insurance from the National Flood Insurance Program through an agent.) Sewer backup or damage from underground water is also not typically covered, but you can add an endorsement to your policy (an endorsement being an addition that adjusts your insurance) to make sure that you’d be covered.
Okay. That was a lot of information about condos and condo insurance. If you have any questions about what condo insurance will and will not cover, please feel free to reach out to our team. We would be happy to help you with your insurance needs. And if you’re looking to get a quote for condo insurance, we’re here to help you get the best coverage at the best rate. All you have to do to get started is fill out our online form or give us a call today.