Owners of condominiums share costs and insurance for areas held in common with other owners. These areas include building exteriors, hallways, lobbies, pools, parking lots and grounds. Insurance for the commonly held areas is paid for out of association dues that are assessed regularly on the condo owners. A master policy details the areas that are covered by the owners’ association.
Owners are individually for insuring the contents of their individual homes. Depending on the master policy, they may also be responsible for fixtures within the condo, such as appliances, countertops, lights, ventilation units, and flooring. A “bare-walls-in” master policy covers the exterior building surfaces to the walls of the unit, but nothing within the unit. The “all-in” or "single entity" policy covers permanent fixtures or installations within the condo. If you are buying a condo, study a copy of the association rules and master policy for a good understanding of your prospective insurance needs.
If the condominium building is damaged in an event covered by the master policy, the condo owners will be collectively responsible for any deductible amounts that must be paid out of the association’s bank account. As in other insurance policies, the higher the deductible amount, the cheaper the insurance premiums. Master policies have no effect on individual policies held by the condo owners, who cannot make any claim on their own against the master policy carrier.
To determine the amount of condo insurance you need, you must estimate the replacement cost for everything covered by the policy. This may include structural elements such as flooring, cabinets, countertops, carpets, window treatments, and light fixtures. You must also consider the replacement cost of personal content — such as furniture, rugs, jewelry, works of art and televisions — for which you can estimate a market value.
Cash Value and Replacement Cost Coverage
With cash-value coverage, the condo insurance pays the replacement value of the lost item, minus any depreciation. The insurance carrier will assign a greater depreciation amount to older fixtures and appliances. Replacement-cost coverage estimates the amount needed to buy a brand-new replacement. The carrier does not figure depreciation into the calculations.
Loss Assessment and Liability
Individual condo insurance may also cover “loss assessment,” meaning an amount assessed by the association against the owners. These might arise from liability claims by someone injured in a common area, or exterior damage that is not covered by the master policy. Personal liability and medical expense coverage would also cover an owner who is sued by another party for property damage or bodily injury.
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