5 things to consider when buying your condo insurance policy
At the risk of stating the obvious, a condo 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, given that the former is smaller, it is 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 landlord policy. Check out these tips to keep in mind when purchasing your condo insurance.
1. Find out first what the master policy covers
When you pay your condo association dues, you are throwing your money with all the other owners to collectively secure the common areas of the building. This is called master policy. Before signing a personal policy for your own residence, research the terms of the master policy and find out exactly what you are already paying to avoid paying for double coverage unnecessarily. There are two main types of master policies: bare walls or all-inclusive. The bare wall policies cover everything that has to do with the actual structure of the building, but nothing within the unit itself. All-inclusive policies may cover certain accessories within the unit, such as lighting or flooring. Naked master policy owners will need a higher rate of individual insurance than those with a comprehensive master policy.
2. Happy vs. Structure policies
When you choose your condo insurance policy, you need to make sure your policy covers both content and structure, not one or the other. In the event of a fire, you not only want to be able to replace your carpets (content), but you also want to be able to replace your kitchen cabinets (frame). Make sure you have a condo insurance policy that covers both.
3. Know the difference between cash value coverage and replacement cost
Cash value coverage includes depreciation on your payment amounts. For example, if you were to replace a mattress five years after purchasing 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 account for depreciation. You would get the money you need to replace your mattress with a new model today, resulting in a higher payment.
4. Coverage of natural disasters
Does Your Condo Insurance Cover Floods? What if you have a backup toilet? 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 is generally better to go wrong on the safe side and get at least minimal liability coverage in the event that you or a member of your family is the cause of an accidental mishap or your dog bites someone.
It is never a bad idea to purchase additional coverage beyond the minimum amount covered by the main condo policy. You will have to consider your unique needs and lifestyle when deciding which policy to select, but the peace of mind will pay off in the long run.