Types Of Condominium Insurance
Although there are six main types of homeowners insurance policies, there are only need a few you to worry about if you own a home or condominium.
These are coverages A (dwelling), B (other structures), C (personal property) and E (personal liability) insurance policies, and are what we shall be looking at in this article on condominium insurance.
Overall, there are quite a lot of similarities between insuring your house and insuring a condo. Although because a condo differs from a house in the sense that it lacks a front and back garden, there are some differences in how each of these properties are insured.
Another major difference is the shared responsibility that you will have with other unit owners in your apartment block, and this has extra ramifications when it comes to how you are insured and where you will receive that insurance coverage.
So if you are looking to insure your new condo, or are just looking for some more information about getting your condo insured, keep on reading and you will find out about the most important things you need to know.
Coverage A (dwelling) Home Insurance
Coverage A condominium insurance, also known as building or dwelling coverage, provides you with coverage against damage that occurs to your condominium.
There are two things you must consider when taking out this type of policy.
The first is the coverage that you are already receiving under your association master policy and the amount of additional building coverage you will need to cover the interior of your condominium. The second, is the types of loss that you would like to be protected against.
Both of these factors will affect the type of coverage that you need to take out, and ultimately, how much it is going to cost you to do so.
How Much Building Coverage Do You Need?
The best way to calculate how much building coverage you will need is to first make two columns. In one column, list all the structural items that you are responsible for, and in the other column, list how much it would cost to replace each item including the cost of labor.
Once you have finished your list, total up the replacement cost column and add 20% to it to accommodate for any errors in the valuations that you have made with your items.
This final value is the amount of building coverage that you will require for your condominium with a coverage A insurance policy.
What Is Your Condo Insured Against?
In general, your condominium association’s master policy will insure the following structures:
• Electrical wiring
• Water piping
• Air conditioning & central heating units
• Perimeter & partition walls
• Windows
• Drywall and plaster
• Common areas such as hallways, staircases and elevators
It is important to note however, that the type of coverage you receive can vary depending on your insurer. So in order to be sure about exactly what your association’s master insurance policy covers you against you should review it yourself. But overall, you can expect it to offer a similar level of coverage as was listed above.
The significance of looking at exactly what sort of coverage you receive as standard under your condo master policy is that it will quickly reveal to you which areas of your condo are currently uninsured. These areas are known as “gaps” because they are areas of your policy which expose you to uninsured financial loss.
To close these gaps, and therefore reduce your exposure to uninsured loss, you will need to take out additional insurance to insure yourself against any risks which you feel are worth insuring against.
Some of the additional things that you may need to insure in your condo are:
• Floor coverings
• Wall coverings
• Ceiling covering
• Lighting fixtures
• Kitchen and bathroom cabinets
• Your own personal property
• Furniture such as sofas and beds
• High value items such as jewelry
What you will find is that anything not initially covered by your master policy will leave you with many things that you can potentially insure.
As was mentioned previously, having greater insurance coverage is going to cost more money, so the amount that you are willing to spend is going to determine the level of condo insurance that you receive.
Insurance Coverage Options
Most standard unit owner insurance policies come with broad causes of loss as standard. This protects your residence against a list of 15 causes of loss, also known as perils, as has been listed below.
• Fire/lightning
• Wind/hail
• Explosions
• Rioting
• Aircraft damage
• Damage by other vehicles
• Smoke
• Vandalism
• Theft
• Volcanic eruptions
• Falling objects
• Roof damage from snow/ice
• Accidental home water damage
• Weather damage to plumbing
• Some electrical damages
If however, you suffer a loss that is not due to one of the 15 related perils, then you will not receive compensation under your condo insurance policy.
But, if you so desire, you can extend this coverage by taking out special form causes of loss, also known as special perils or open perils coverage, if you feel that broad form coverage does not provide you with sufficient protection.
Special perils coverage will provide coverage for virtually any kind of loss, and is recommended if you want to protect yourself from suffering uninsured losses in the future. There are a few exclusions, such as no protection against flood or earthquake damage, but for the large majority of people special perils coverage should be more than adequate.
The following two videos discuss the difference between broad and special perils insurance in more detail.
Lower Insurance Premiums With Higher Deductibles
It is worth remembering that regardless of the insurance policy that you take out, you can save money on your condo insurance by electing to have higher deductibles to reduce your premiums.
This means that for every claim you make you will have to pay a higher amount before your insurance company will pay the rest of the claim. By doing so however, you are taking on extra risk because you will need to have the money available to pay for claims below your deductible threshold, and also have the money to pay for claims above your deductible limit.
If you make a lot of claims, having a higher deductible can actually cost you more money overall than if you had a lower deductible. But if you make few claims, having a high deductible on your condo insurance can be an excellent and very effective way to save yourself money over the course of your policy.
For example, raising your deductible limit from $500 to %1000 can usually yield premium savings somewhere in the region of 25-30%, which can subsequently help to make higher levels of coverage much more affordable.
Coverage B (other structures)
Coverage B condo insurance provides coverage for detached structures that exist outside your apartment. If you have a detached structure that you would like to insure, make sure that you take out enough insurance to cover all your structures.
Most condo owners will not have any detached structures that they need to take out additional coverage for, and so coverage B tends to be far less common with condo owners than it does with regular home owners.
You may however, have a detached structure in the form of a garage, and in some cases, a greenhouse or shed.
The good news is that you will automatically receive 10% coverage from your coverage A policy, so unless you have high value detached structures, then this should provide you with enough insurance for those structures without you incurring any additional expense.
Coverage C (personal property insurance)
Coverage C condominium insurance, also called personal property insurance, provides you with coverage for all your personal property.
This tends to be an especially important form of insurance, as in a condominium you are responsible for all your personal possessions and therefore must pay to have them replacement if they are lost, stolen or damaged.
In order to make sure that you have adequate personal property insurance, it is crucial that you take the time to value all the items that you own. This figure will then determine the level of coverage you will need to take out.
The following video provides some useful information on how you can document your building and contents so that you have this information available at hand if you ever make a claim to your insurer.
For full coverage it is also recommended that you take out a replacement cost rather than an actual cash value insurance policy, as this way if you ever make a claim, you will be paid out the new cost of your lost items rather than their old historic/depreciated value.
Finally, to give yourself much greater protection against a wider variety of losses, upgrade your broad causes of loss policy to special causes of loss. This will cost a little bit extra, but the additional protection that you get makes it extremely worthwhile especially if you have young children or high value items.
Coverage E (personal liability)
Coverage E condo insurance, also called personal liability insurance, provides you with coverage for any injuries or property damage that you cause to others.
This coverage tends to be quite comprehensive in the risks that it protects you against, and is certainly recommended if you have children.
Condo Master Policy
If you are a regular homeowner you are only required to insure your home and any detached structures outside of it such as in the front or back garden. When it comes to owning a condo however, you are responsible for insuring that condo and also some areas of your condominium complex which are common to all residents.
These are classified as public areas and can include stairways, elevators, swimming pools, hallways, laundry areas, sidewalks and open areas where people may congregate or travel through. Because of this shared responsibility and insurance duty, it is therefore in your best interest to know exactly what areas are insured by your condominium master policy and which areas are uninsured.
It is important to know this because if you or a guest were to injure themselves, then whether or not you would receive insurance coverage will depend on whether that area was covered by your master policy. Knowing areas of insurance will also allow you to take out extended coverage if you feel the need to do so, although for most people, their master policy should provide them with sufficient coverage.
Another reason why you may consider taking out additional coverage is if your insurance policy has a high deductible, as this will mean that you will have to pay out a large amount of money before your insurance company will step in and compensate you the rest.
A good way to determine whether you would benefit from extra insurance in your particular area is to speak with other condo owners, especially those who have owned their apartment for several years. They are likely to be able to give you a quick summary of the risks you are insured against, and the additional risks which you are uninsured against.
In the large majority of cases however, you should focus on insuring your condo and its contents first as that will be the biggest source of risk which you face.
