What is Condo (HO6) Insurance? What Does it Cover?

Condo insurance, also known as a HO-6 insurance policy, protects condo units while also providing personal liability coverage and living expense coverage in the event that a condo becomes uninhabitable. Because they protect your individual unit, HO-6 policies are also known as walls-in coverage, whereas your condo association's master policy protects the building's common areas.

However, standard condo insurance does not cover certain events, such as floods. Depending on where your condo is located and how much time you spend there, you may want to consider additional policies.

What is covered by the condo association or HOA master insurance policy?

Unless otherwise specified in the bylaws, all common areas in a condominium building are typically covered by a "master insurance policy" purchased by the condo association or homeowners association (HOA). This includes not only the roof and exterior of the building, but also internal areas such as elevators and hallways.

The cost of the master policy is usually shared by all unit owners in the form of recurring condo or HOA fees. Condo master insurance policies are classified into three types:

Bare walls coverage is a limited master insurance policy that protects the structure as well as the majority of fixtures and furnishings in common areas. It also includes any property owned collectively by the condo association.
Single entity coverage offers everything included in bare walls coverage and also provides coverage for built-in property such as fixtures in individual condo units.
All-in coverage applies to all property owned by the condo association collectively or that is part of the condominium structure. It is the most comprehensive condo master insurance policy available, covering all condominium improvements and additions.

The type of master insurance policy in place at your HOA or condo association will have a direct impact on the amount of condo insurance you'll need to purchase. You should request a copy of the association's declaration page, which details the policy and what it covers.

Condo associations may also have other types of commercial insurance, such as a fidelity insurance policy to cover employee dishonesty, but these policies are typically unrelated to your insurance needs as a condo unit owner.

What Does Condo Insurance Cover?

A typical condo insurance policy covers the following categories:

Building property: the unit itself, including walls and fixtures
Personal property: furniture, electronics and other movable goods
Personal liability: legal expenses from claims or lawsuits against you
Loss of use: costs of lodging/transport if unit is uninhabitable
Loss assessment: your portion of any losses shared out by the association

The primary difference between a condo owner's HO-6 policy and a standard HO-3 homeowners insurance policy is that HO-6 policies only cover the interior structure of a unit from the "walls-in." Otherwise, the coverage provided by HO-3 and HO-6 policies is very similar in terms of personal property, liability, and additional living expenses.

Typically, a condo's dwelling and property coverage will include a list of "named perils" such as fire, hail, theft, and vandalism. Any hazards that are not specifically mentioned are not covered, which means you are financially responsible for those damages.

Flooding is typically an excluded peril in both condo and homeowners insurance policies, necessitating the purchase of additional coverage.

However, by adding a Unit Owners Special Coverage A endorsement, you can convert your condo insurance into an "open peril" policy. An open peril policy covers damages from any cause except those specifically listed in the policy. Flooding, earthquakes, and sinkholes are frequently mentioned as exclusions from coverage.

Condo building property coverage

Condo insurance covers the interior of your unit, including the floor, interior walls, cabinetry, sinks, tiling, and any other permanent fixture. If a condo is damaged or completely destroyed by a covered peril, your condo insurance policy will pay up to the policy's coverage limit. This is typically the full cost of replacing the unit.

When damage affects more than one area of a condo building, the division of ownership and insurance coverage between condo owners and condo associations can present difficult questions.

An incident may be covered by multiple policies at the same time, depending on the areas affected. A leaking roof, which is covered by the master policy, could also cause water damage to your unit below, triggering your HO-6 policy. Similarly, water damage in a neighboring unit that spreads to you would necessitate the use of two HO-6 policies.

Consider the added value of any new fixtures or construction when determining your dwelling coverage limit.

Example: You remodel your kitchen, adding new finishes and replacing fixtures. This raises the value of the unit's interior and may cause your total home value to exceed your previous dwelling coverage limit.

Condo contents and personal property insurance

Personal property (or contents) coverage in a HO-6 insurance policy protects a condo owner's belongings. Condo insurance, like homeowners insurance, will replace any property owned by the condo owner or family members in the event of a loss, up to the policy limit. Furniture, clothing, electronics, and any other items not permanently attached to the unit are all examples of covered property.

Property claims typically have a limit of about 50% of the dwelling coverage.

A condo owner's belongings, like the structure itself, are protected by a long list of perils. The most serious of these events are fire, lighting, and theft.

Example: A storm smashes a window in your condo, allowing rain to pour in and soak your furniture. The cost of replacing both the window (structure) and the furniture would be covered by a condo insurance policy (personal property).

Personal property coverage is not limited to items located within the condo unit. You could file a condo insurance claim for belongings that are lost, damaged, or stolen while you are away from home. For instance, if something was stolen from your car, you could file a condo insurance claim for it.

Condo liability insurance

Condo liability insurance protects you and your family members from bodily injury and property damage lawsuits. Liability coverage is an essential component of all condo insurance policies, just as it is for homeowners and renters. Without liability insurance, a condo owner may be forced to pay for legal expenses out of pocket, which could be financially devastating.

Liability coverage of at least $100,000 is standard in most condo insurance policies. Policyholders can always add more coverage, typically up to $500,000. If you require additional liability coverage, an umbrella policy can be purchased to supplement the liability limit of your condo insurance.

Loss of use coverage

Loss of use coverage (also known as additional living expense coverage) is less well-known than property or structural coverage, but it can be very valuable. If your condo becomes uninhabitable due to damage or an evacuation order, loss of use coverage reimburses you for the additional costs you incur to maintain your regular standard of living.

Example: Your condo burns down, leaving you without a place to stay. Loss of use coverage will pay for your room and board at a different location while your vehicle is being repaired — and in some cases, it will even cover the extra costs of a longer commute.

The terms for loss of use can vary: some will reimburse you up to a certain amount per day or a set number of days, while others will only reimburse you up to a certain amount per claim.

Loss assessment coverage

Loss assessment insurance, also known as special assessment coverage, is an optional coverage that can be added to a condominium insurance policy. It applies to situations in which condominium unit owners are financially responsible for a shared loss, as long as the issue is a covered peril.

Example: Fire damage to your condo building's lobby ends up costing the association more than it had budgeted. Special assessment coverage will cover the individual share that unit owners must contribute to make up the difference.

Flood & Earthquake Insurance for Condos

Damage caused by earthquakes, floods, or sinkholes is not covered by condo insurance. These risks are frequently excluded from condo policies, and if you live in a high-risk area, you'll need to purchase separate coverage. As a mortgage loan requirement, you may also be required to purchase certain additional coverages, such as flood insurance.

Vacant Condo Insurance

If your condo is vacant for an extended period of time, usually at least 30 days, your condo insurance policy may not cover claims for damage that occurs during the vacancy. Unoccupied and vacant properties are considered higher risk by insurers because issues may not be addressed quickly and break-ins are more likely.

When you plan to be away for more than a month, you can purchase vacant condo insurance from your insurer to ensure that your property is protected. This frequently comes at an additional cost, but the alternative is to bear the full risk of theft or a peril destroying your property.