What Is Condo Insurance?

At some point, you’ll probably be ready to own property. Maybe you’ve finished a business degree using accredited online degree programs and you want to be a landlord. Or maybe you’re simply ready to pay a mortgage instead of rent.

A condominium, commonly called a condo, is a great investment for those ready to leap from the safety net of renting but who aren’t quite ready to own a home. You own property, but a lot less responsibility and often less liability are associated with the purchase.

When you purchase your condo, you’ll be asked to get a condo insurance policy. Basically, it insures both you and the property in the event of an accident. But there’s more to choosing a policy than taking the first policy presented to you. It’s important to do thorough research and know what you’re getting into before paying your premium.

Condo Insurance versus Homeowners Insurance

Condo and homeowners insurance are often confused, but they’re different entities. You should understand some key differences so you don’t get them mixed up.

A main difference is the amount of property that’s covered in each policy. Homeowners insurance covers both the inside and the outside of the house, as well as the land it’s built on. Condo insurance only covers the inside of your condo.

This is an important distinction because the exterior of the condo is usually maintained by all of the condo dwellers. They enlist the help of a homeowners association (HOA) to maintain all common areas, including the building structure, outside land, and common areas. When repairs must be made on the building, you’ll jointly come together to cover the costs, whether through insurance or out of your pocket.

Because the differences between homeowners and condo insurance are so distinct, they should not be treated the same. You’ll shop for coverage in your condo insurance so that it works in your best interest depending on the way shared responsibility is set up for your building.

Condo Insurance Coverage Explained

As explained previously, condo insurance is there to protect you, and a few standard coverages come with it. Here are some of the basics:

Building Property Protection: If the interior of your condo is damaged, the insurance will pay to cover it, including the walls, ceiling, built-ins, fixtures, and flooring. Since you no longer have a landlord, this is a huge asset to you.

Personal Liability Coverage: If someone were to hurt themselves on your property, whether you were negligent or not, condo insurance will cover the related medical bills and legal expenses that might follow if that person sues you. It will also cover funeral expenses, the cost of a probate lawyer, or other estate-related expenses if the injured party passes away.

Personal Property Coverage: If your personal items are burglarized, condo insurance will pay for your losses. You can choose whether you want the insurance to replace stolen items of if you’d like the cash value.

Loss of Use Coverage: Let’s say a fire breaks out, rendering smoke and burn damage throughout the place. It’s not destroyed, but it makes your condo uninhabitable. You’ll have to move out until the damage is repaired, and condo insurance will pay for your hotel, meals, and other travel expenses.

Most condo insurance policies will include this coverage, so you don’t have to ask for it. You’ll find that a surprising number of costs are factored into these coverage options.

Optional Coverage Options for Condo Insurance

Depending on where you live, you may have unique coverage options that can be added on to your original policy. For example, if you’re looking for condo insurance in New Jersey, you may want extra coverage to factor in hailstorms.

Here are a few options that you might be able to add to your master policy.

Loss Assessment Coverage: This covers you in situations for damage in common spaces. For example, if flooding occurs in the lobby of your building, you’ll be responsible to help pay for the damages, and this policy would cover that.

Flood and Earthquake Insurance: In areas where flooding, earthquakes, and sinkholes are common, you might want to consider separate insurance to cover these disasters. Your original condo insurance probably doesn’t cover damages related to these issues.

Vacant Condo Insurance: If you’re away from your condo for an extended period of time (more than 30 days), such as on a business trip or extended vacation, damage can still occur to your home. Your insurance may not be willing to cover it if it occurred while you were away. This extra insurance will protect you and your property in that event.

Plumbing Insurance: Most condo insurance policies do not cover damages done to your main water lines and other plumbing-related problems. They may repair the water damage on your property, but you are responsible for repairing the pipes themselves. Plumbing insurance covers this highly expensive problem for you.

You might have other options for coverage of your condo. Research your choices carefully to get the best coverage for your situation.

FAQs about Condo Insurance

A few questions might come to mind when you’re looking into condo insurance. Perhaps this list can answer some of those questions for you.

Q: How much coverage do I need?

  1. The coverage should be high enough to cover major structural damage and the deductible low enough that you can pay for it out of pocket. Carefully evaluate your situation to determine the extra policies you’ll put in place. Your insurance agent might be able to give you some advice on that, but keep in mind that most insurance agents are paid on commission, so they may try to upsell you to make more money.

Q: Should I take the cash value of losses or replacement-cost coverage?

A: Replacement-cost coverage does not take into account the depreciated value. If your 2010 laptop was stolen, you’ll receive enough money to replace it with a brand new model. Taking it at cash-value means that the company will consider depreciation when factoring in the value, so you’ll receive less than it would cost to buy a new laptop. Replacement value is obviously more valuable, but it also raises your premiums.

Q: Is condo insurance tax deductible?

A: No. The IRS has a rule against deducting either condo insurance or homeowners insurance from your taxes. However, you might be able to deduct condo insurance as a business expense if you own a condo for the purpose of renting it out.

Q: Does condo insurance cover natural disasters such as a hurricane?

A: Condo insurance will cover the structure of your condo against hurricane damage. Damage to your possessions may also be an option. However, it may not cover damage to plumbing, wiring, or fixtures unless you have added coverage. Check your master policy to see what it specifies and determine if you need additional coverage.

Q: Are appliances covered in condo insurance?

A: Yes. Most condo insurance policies are designed to cover the contents of your condo, including your appliances. However, this is not always the case. Always refer to your master policy to be sure.

Understanding the ins and outs of condo insurance will help you choose a policy with adequate coverage. Just evaluate your situation and location, and make sure you have enough coverage to give you peace of mind and protect you in times of peril.