5 things to consider when buying your condo insurance policy

At the risk of stating the obvious, a condominium is very different from a house. However, both types of property must be insured. While it may seem counterintuitive that condo insurance is more complicated than homeowners policies, since the former is smaller, it’s actually quite true. Between dealing with the building association, the building’s master policy, and other residents, it’s not as straightforward as a simple homeowner’s policy. Check out these tips to keep in mind when shopping for your condo insurance.

1. Find out what the main policy covers first

When you pay off condo association debt, you are investing your money with all the other owners to collectively insure the common areas of the building. This is called a master policy. Before you sign up for a personal policy on your own residence, research the terms of the master policy and find out exactly what you’re already paying for so you don’t pay for double coverage unnecessarily. There are two main types of master policies: bare walls or all-in. Bare wall policies cover everything related to the actual structure of the building, but nothing inside the unit itself. All-inclusive policies may cover certain fixtures within the unit, such as lighting or flooring. Owners of bare wall master policies will need a higher individual insurance rate than those with an all-inclusive master policy.

2. Happy vs. Structure Policies

When you choose your condo insurance policy, you want to make sure your policy covers both the contents and the structure, not one or the other. In the event of a fire, you not only want to be able to replace your carpets (contents), but you also want to be able to replace your kitchen cabinets (framework). Make sure you have a condo insurance policy that covers both.

3. Know the difference between cash value and replacement cost coverage

Cash value coverage factors depreciation into your payment amounts. For example, if you were to replace a mattress five years after you bought it, the cash value policy would take five years of depreciation into account when calculating how much money you are owed. Replacement cost coverage does not take into account depreciation. You would get the money you need to replace your mattress with a new model today, resulting in a higher payment.

4. Natural Disaster Coverage

Does your condo insurance cover floods? What if you have a toilet seat back? While a master policy may cover flood damage to the actual building, it won’t help you replace your flood-damaged belongings. Water backup coverage is another area where residents must purchase individual policies in the event of a building sewer overflow.

5. Determine if liability coverage is necessary

What if someone sued you for property damage caused by your guests or children? Does your insurance policy cover liability? When thinking about this type of coverage, it’s generally best to err on the safe side and get at least minimal liability coverage in case you or a family member is the cause of an accidental mishap or your dog bites someone.

It’s never a bad idea to purchase additional coverage beyond the minimum amount covered by the condo’s master policy. You’ll need to consider your individual needs and lifestyle when deciding which policy to select, but the peace of mind will pay off in the long run.