Everyone knows that homeownership can come with a hefty price tag living in this area. It’s a side effect of residing in of one of the most affluent areas in America. Every one of us has experienced when friends from out of state buy a nice home and joke about what you could get for the same amount of money in DC, MD, and VA. The reality is, for most young professionals in the area a condominium is the starter home. They are affordable for a young professional and a great way to start investing in your future. With so many condo owners being first time buyers it’s no wonder that an already unique insurance situation can become even more confusing. Before you buy your first condo it is important to understand what is different about condo insurance and what condo insurance covers.
Condo Insurance is commonly referred to as HO6 insurance or HO6 policy. This is just insurance jargon citing the property specifically as a condo. A Homeowner’s policy is referred to as a HO3 and a renter’s insurance policy is HO4. It can get confusing when someone is renting a condo that someone else owns so, often times realtors, mortgage lenders, and independent insurance agents will reference them by the code HO6 insurance or HO6 policy to prevent confusion amongst each other. For first time clients, we will stick to condo insurance.
The most unique feature of a condo or HO6 policy is the dwelling coverage. Dwelling coverage is just a fancy way to say the actual building/structure itself. When we compare condo insurance to home insurance and/or renters insurance, it is almost like a combo of both. Let’s take a look at each so we can understand how condo insurance is different. With a home insurance policy the person owns the land, the building, other structures on the property, and all the stuff that goes inside. With a home insurance policy the owner needs coverage to completely rebuild the entire structure if something happens to the building. A renter on the other hand, does not own the building, they just own the personal property they have in it. A renter does not need coverage for the building, just for their personal belongings. A condo insurance policy is different because the person owns their unit only. Condo insurance has dwelling coverage, but it is different when it comes to coverage.
A condo building has its own dwelling coverage to cover the building as a whole- the actual structure of the building. This is often referred to as the master insurance policy. Each individual unit owner is then responsible for their unit. Condo policies will usually break into two types of policies based on what the master policy will cover. These two types of policies are referred to as “walls in coverage,” or “alterations and additions coverage.” Walls coverage in a condo policy means the unit owner is responsible for the walls, flooring, and cabinetry, basically everything from the walls inward. Since this is part of the dwelling because it is attached to the walls, this should be accounted for in the dwelling coverage. A mortgage company will typically want to see coverage of 20-25% of the purchase price of the condo, which is commonly accepted as sufficient coverage. An alterations and additions condo policy has a master policy that already covers the inside of the unit so, you really only need dwelling coverage for changes you have made like a remodeled kitchen since the master policy isn’t going to pay to rebuild that custom kitchen. The average cost of a “walls-in,” policy is a little more because you typically have a higher dwelling coverage.
Now that we understand how a condo policy with dwelling coverage works, what other condo insurance policy coverage is unique and important? When you compare home insurance with condo insurance another important coverage is loss assessment. When you are getting a quote and before you purchase your condo insurance, you need to ask about loss assessment. As part of a condo association everyone that owns a condo is responsible for a percentage of common areas. If there is a fire and a major loss to a common area all unit owners are responsible to contribute equal shares of the cost. Loss assessment coverage will cover that for you.
Beside these major differences, a condo insurance policy covers a lot of other potential risks including coverage for your personal property, medical payments, and personal liability coverage. In addition, you can purchase water-back up as an optional coverage so, be sure to ask what other coverage options are available when you get a quote from an independent insurance agent. The average cost of a condo insurance policy is inexpensive and well worth it. At Bridge First Insurance, I know that we have particularly competitive quotes for condo insurance. Be sure to tell the young professional or anyone else for that matter looking to buy condo insurance to read this blog and reach out to us for a quote today!
Speak with a Bridge First Insurance Agent today! (571) 249-3857
Previously on the Blog:
Jack has achieved success in the insurance industry through a consultative and honest approach to clients. He designed this approach around educating clients on important coverage and allowing them to decide what policy would best fit their insurance needs. In 2013, Jack and co-founder Dave Zappacosta, established Bridge First Insurance, as an independent insurance agency operating in Virginia, DC, and Maryland.