Homeowners insurance protects a home’s entire structure and the contents within. Condo insurance works differently. Here’s how to be adequately protected no matter which you own.
Comparing policies
When you own a freestanding home, you must insure all your property. That includes the entire structure of the house, its contents and the other buildings and structures on your lot. Your homeowner’s insurance is designed to cover the cost of replacing anything damaged or destroyed.
When you own a condominium, you own your living space, but not the building and structure within which it sits. Condo insurance covers the interior of your living space, including the interior walls between rooms, any improvements you have made and the contents. It does not cover the building’s exterior walls or roof. Those components are owned by the homeowners association (HOA), and the HOA is responsible for covering the building and its structure with a master insurance policy. The HOA master policy covers not only the structure of the condo building but also the development’s common areas, such as the grounds, landscaping, pools and the structures of other amenities.
Whether it’s for a freestanding home or a condo, your insurance policy also provides liability insurance to pay for injuries to guests on your property. Likewise, the HOA’s master policy provides liability coverage for people hurt in common areas.
Your coverage under either standard homeowner’s insurance or condo insurance should provide replacement cost coverage. This sort of policy adjusts each year to increase coverage due to rising construction costs.
If you live in a neighborhood with an HOA, whether in a freestanding home or a condo, ask your agent about loss assessment coverage. In the event that damages awarded in a lawsuit brought by someone injured in the common areas exceed the HOA’s master policy limit, the HOA can charge all property owners a special assessment to cover the excess. Loss assessment coverage kicks in to pay the assessment amount for you.
If you are a renter
If you are renting a house or condo, you need only renters insurance that covers your contents and liability. The owner of the property you are renting should have their own policy protecting the home itself from damage.
Related – Homeownership Without the Headaches
