Condo and co-op owners need homeowners
insurance, but it's not the same type you'd get for a house
Article Courtesy of The Business Insider
By Ronda Lee
November 13, 2020
Condo HO-6 insurance is a type of homeowners
insurance for condo and co-op owners.
The major difference between condo and
standard homeowners insurance is the dwelling coverage.
Although not required by law, mortgage lenders
and condo associations may require condo insurance.
The average annual cost of condo insurance in
the US is $488.
There are several types of homeowners insurance based
on the dwelling type: condo, home, mobile home, or new construction.
Condo insurance is also known as an HO-6 homeowners insurance policy.
The major difference between standard homeowners insurance and condo
insurance is the dwelling coverage: how it protects the structure
Unlike car insurance, homeowners or condo
insurance is not required by state law. However, if you have
a mortgage, your lender will require homeowners insurance to
protect the investment. Additionally, a condo association's
by-laws may require condo owners to have condo insurance.
What is homeowners insurance?
Homeowners insurance protects the dwelling, your belongings,
and offers liability coverage for injuries that happen on
your property. If the mailman slips and falls on the
sidewalk, the dog bites a guest, a tree falls on your roof,
or the neighbor's kid injures himself doing a cannonball in
the swimming pool, homeowners insurance can protect you.
If you live in a condo or co-op, the building and
common areas are covered by the condo or co-op association's master
policy, to which condo owners contribute via condo assessments.
Condo insurance vs standard homeowners insurance
Special form (HO-3) is the most common type of homeowners insurance
because it covers the house, your belongings, and liability coverage,
according to Hippo. Condo insurance is different from your standard
homeowners insurance because of the dwelling coverage.
In this respect, condo insurance resembles renters insurance because
neither condo owners nor renters own the dwelling.
Condo association's master policy covers the building and common
For condominiums, the building and common areas are owned and managed
through the condo association. The condo association's by-laws will
outline insurance coverage for the dwelling, known as the master policy.
Owners contribute to the master policy insurance coverage through
assessments paid to the condo association. The exterior walls and
hallways are considered common areas and would fall under your condo
association's master policy.
In addition to covering the dwelling, the condo association's master
policy covers liability for injury that occurs in common areas. You need
to check your association's by-laws to determine whether the master
policy has "all-in" coverage or "bare walls" coverage.
An "all-in" master policy covers "protects external structures, common
areas, liability, fixture repairs, replacements and even upgrades made
by individual owners," according to Hippo, whereas a "bare walls" master
policy covers "only external structures and common areas."
Condo insurance covers what the master policy and assessments do not
Although the condo association's master policy covers the building and
common areas, your assessment payments do not cover the contents of your
unit, injuries that occur in your unit, or damage to your unit. Condo
insurance is referred to as "walls-in" coverage because it covers
everything inside your walls, whether that's your property, your
liability, or damage inside your unit.
Plus, condo and co-op owners get a specific type of coverage called loss
of assessment, which kicks in to cover any additional costs that may be
requested should the condo association's own coverage fall short. If the
association's coverage isn't enough should there be an accident or
event, the association will ask for additional payment from each member,
and loss of assessment coverage helps condo owners cover those payments.
**Available as add-on coverage if not part of
***Required if you are in a flood zone, but
most homeowners experience some flood.
****Depends on the type of coverage you
There are several
types of homeowners policies. However, they all fall within
two categories: named peril policy or open peril policy. A
"named peril policy" covers you for listed events, like a
fire, storm, or theft, whereas an "open peril" policy covers
just about anything that might happen, unless your policy
specifically notes that it's not covered.
Lemonade provides the following example of an open peril: If
an apartment flood ruined your computer, and your policy
doesn't specifically say flooding isn't covered,
your insurance company will have to approve your claim, by
Condo insurance falls
under named peril. Here are a few more instances of events
that might be considered named peril and open peril:
- Fire or lightning
- Windstorm or hail
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water
- Sudden and accidental tearing, cracking,
burning, or bulging
- Sudden and accidental damage due to short
- Volcanic eruption
- Freezing pipes and systems in vacant
- Damage to foundations or pavements from
ice and water weight
- Theft from a dwelling under construction
- Vandalism to vacant dwellings
- Latent defects, corrosion, industrial
- Settling, wear, and tear
- Pets, other animals, and pests
- Weather conditions that aggravate other
excluded causes of loss
- Government and association actions
- Defective construction, design, and
There are eight types
of homeowners policies based on the type of home you have.
If you have a mortgage, your lender may have a preference
for the type of coverage necessary to secure the home loan.
Therefore, it is best to talk to your agent and lender to
make sure you have proper coverage.
condominium associations will have rules in the by-laws
about homeowners insurance coverage minimums.
*Most lenders don't consider this sufficient
**The structure is "open peril" while
belongings are "peril."
***Typically for brand-new homes only.
****Check with your homeowners association (HOA)
According to the
Condominium/Cooperative Unit Owner's Insurance Report by the
National Association of Insurance Commissioners (NAIC), the
average annual condo insurance premium in the United States
in 2017 was $488.
Homes located in
weather zones or disaster-prone areas — flood zones,
hurricanes, tornadoes, wildfires, mudslides, hail, and
earthquakes — will have increased premiums because these
types of events are not included in basic coverage and will
need to be add-on riders.
Note that the cheapest
price is probably not the way to go if that means a company
isn't responsive when you file a claim. Focus on customer
service, complaints, and the reputation of the insurance
Average HO-6 condo insurance annual premium
$13,999 and under
$14,000 to $19,999
$20,000 to $25,999
$26,000 to $31,999
$32,000 to $37,999
$38,000 to $43,999
$44,000 to $49,999
$50,000 to $74,999
$75,000 to $99,999
$100,000 and over
How to find condo insurance
If you currently have condo insurance, review your policy coverage
yearly, especially if your condo association has changed by-laws
regarding insurance coverage. If your condo insurance company hasn't
provided the level of service you expected, maybe it is time for you to
select a new provider.
Remember that a cheap price doesn't mean good customer service. The
average cost for condo insurance will vary based on the state where you
live and whether you are urban or rural. Focus on customer satisfaction
rankings, like those from J.D. Power, and comparison shop. This is
especially important for those living in disaster-prone areas, when good
service can make all the difference.