How much condo insurance should I buy?
Condos and Co-ops can be tricky when it comes to insurance. It's important that you buy a policy that adequately protects the property you are responsible for, while also not overpaying by adding insurance coverage that you don't need. There are 5 key things you need to know when shopping for condo insurance.
1.) What does the HOA Master Policy Cover? The HOA or condo association will have a master policy that typically covers the exterior walls and common areas. These master policies come in two forms:
- Bare Walls-In (or "Studs-out"): this is the most common, and means the master policy only covers the exterior walls of the building, and you are responsible for all of the interior, including flooring, toilets, countertops, appliances etc.
- All-in (or "All-Inclusive): these master policies protect the exterior and structural interior of the condo, including fixtures and any structural improvements or betterments made by the unit owner. You are only responsible for your personal belongings.
2.) How much would it cost to replace the interior of the condo? Your best bet here is to get guidance from the HOA - ask them how much coverage owners in similar units purchase. Keep in mind that if the master policy is a Bare Walls-In coverage you may need hundreds of thousands in dwelling coverage. Think about the costs to add in finishings, countertops, cabinets, toilets, showers, etc. If the policy is All-in, you likely need far less dwelling coverage as you are only covering the items you physically moved into the condo.
3.) How much are your personal belongings worth? Think couches, clothes, jewelry etc. Make sure your personal property coverage limit is high enough to replace the value of all your personal items.
4.) What is the total value of your assets? You are probably wondering what your net worth has to do with insurance. Well the answer lies in Liability Coverage. Say someone tries to sue you because they injured themselves in your condo, your liability coverage will cover the penalties up to the coverage limit. In today's society, the more money you have saved, the larger the lawsuit against you.
5.) How much would it cost you to rent out a like-kind condo for 9 months? Oh no! There is a fire that makes your condo uninhabitable until it is restored. That means you will have to find somewhere else to live. Keep in mind your mortgage payments will not magically disappear, and the costs of renting out a new place for an extended period of time can be crippling. Make sure your Loss of Use (or "Additional Living Expenses") coverage is enough to support 6-12 month's worth of rent.
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