Guide to Condo Insurance
The current insurance space allows you to purchase policies for all kinds of things, including one for your newly acquired condominium. While your contribution to the condo association partly goes towards a master policy that provides umbrella coverage to the property, the interior of your unit is not taken care of under this policy. This means that in the unfortunate event of a loss or damage to your unit or belongings, you’ll have to pay for the repair or replacement costs out of your pocket.
Such an unexpected financial expense can expose you and your family to monetary troubles, which is undesirable. To remedy this, the financial sages at MoneyWizard are here to explain what condo insurance is and what type of coverage it provides.
What Is Condo Insurance?
A condo is similar in structure to an apartment—usually a unit within a larger residential building—but condos are owned instead of rented. An easy way to tell the difference—the property taxes of a condo are paid by the owner; landlords, rather than apartment renters, pay property taxes for an apartment. It follows that condo insurance is an insurance policy designed to provide coverage for the interior of your condo unit. Condo insurance coverage can differ depending on what is covered under the building’s master insurance policy.
What Does Condo Insurance Cover?
The condo insurance policy generally covers the interior of your condo unit, belongings and living expenses if the condo becomes inhabitable when an insured risk insured occurs. It protects you and the individual unit against specific risks, such as vandalism, theft, and perils like fire and floods.
The condo insurance policy covers:
1. Personal Belongings
The condo insurance policy provides personal property coverage that covers the repair or replacement cost of belongings, such as furniture, clothes, jewelry, and kitchenware, in the condo unit if they are damaged or lost as a result of the risks listed in the insurance policy. Such risks include, but are not limited to perils, such as fire, wind, water, and hail. It is important to understand that some luxury belongings, like high-end jewelry and expensive artwork, can only be covered up to certain limits unless you purchase additional coverage or a special policy.
The personal property coverage is further segmented into the actual cash value and replacement cost coverage. With the actual cash value coverage, your insurer writes you a check for the current value of the property lost while factoring in depreciation. This means that the reimbursement will be less than the current value of new items. However, if you are willing to spend more, replacement cost coverage may be worth considering. Under this insurance plan, your insurer covers the total cost of replacing your lost items with new items.
2. Additional Living Expense Coverage
Assuming the damages to your condo unit are severe, requiring you to book a hotel room temporarily while the unit gets fixed, your insurer will step in and cover all your hotel bills during this period. This provision, under the additional living expense coverage, exempts you from incurring any additional living costs while your condo is being repaired following a peril listed on your condo insurance policy.
3. Liability Coverage
What happens when a guest sprains an ankle on a staircase in your condo and incurs medical expenses? Lucky for you, this will be covered by the liability section as stipulated in your condo insurance policy. Included in the condo insurance policy are medical expenses and liability costs in case you are sued for negligence.
4. Loss Assessment Coverage
If a claim initiated by the condo association exceeds its policy limits, you and the rest of the condo unit owners could be held financially responsible for the difference. Hence, loss assessment coverage could help you avoid paying out of pocket as it protects a condo owner from incurring such unexpected costs for deductibles or damages to the property’s shared spaces when expenses exceed the master policy’s limit. Note that this coverage only takes effect when the cause of the damage has been listed in the master policy.
5. Dwelling Coverage
Dwelling coverage is the part of a homeowners insurance policy that may help pay to rebuild or repair the physical structure of your home if it’s damaged by a covered hazard, However, when your building’s master policy is all-inclusive, it means that the policy covers all items built into your unit. This will include plumbing, cabinets, and electrical wiring. In this case, you won’t need dwelling coverage since the master’s policy will cover any claims. A single entity coverage is basically the same thing as an all-inclusive policy except that it does not cover improvements or additions to the original installations. This puts your finances at risk if you have made significant upgrades to your unit. However, dwelling or building property coverage takes care of these improvements.
Certain risks, such as earthquakes, floods, intentional injuries, nuclear hazards, wear, tear, and damage resulting from underground water, are usually covered under this policy.
Condo Association Master Policy
Like a homeowners’ association, the condominium association manages the shared spaces of the condominium complex, such as exterior walls, roof, parking spaces, hallway, elevator, and fitness center, among others. Condo owners make contributions to the condominium association that partly go towards the condo association master policy, also called the homeowners’ association fee master insurance policy.
This policy takes care of any damages to the exterior of the property and all the previously mentioned shared spaces. The master policy is also responsible for the medical expenses of individuals and visitors injured in hallways, elevators, and at the front door of the property, among all other common arrears. It also covers liability costs when the building management is sued for negligence, pain, and suffering.
Is Condo Insurance Mandatory?
While auto insurance is mandatory by law, condo insurance is not obligatory unless insurance is required as part of a mortgage agreement. In this case, to protect their interest, lenders demand that condo insurance be held on the property until the mortgage is paid in full. This applies to homeowners insurance as well. However, some condo associations may require that all condo owners obtain insurance for their units. For this reason, it is important to review the association’s rules before committing to purchase a condo unit.
Even though condo insurance is not mandatory in Canada, the sages at MoneyWizard strongly recommend that you purchase it. A policy will help cushion you and your family from an unexpected financial burden if an insurable risk occurs. Reach out to us or enter your zip code to get affordable rates in the marketplace.
How Much Is Condo Insurance?
Dozens of factors come into play when calculating the cost of condo insurance. The most obvious one is the amount of coverage you are looking for. Your location also has a significant effect on the cost of condo insurance due to risks specific to certain places. Another factor is the value of your condo unit. As expected, valuable condos require higher premiums, which are closely tied to the age of the condo or its current state. Other factors include your condo security and safety features, credit history, additional coverage, and cost of deductibles.
The premiums payable for personal condo insurance are relative. According to Daniel Mirkovic, CEO of Square One Insurance, an average personal condo insurance policy in Canada costs between $27 and $33 per month.
Condo insurance can protect you from incurring unexpected expenses and liability for certain risks, and we recommended that you purchase a policy. This insurance cover will be invaluable if your condo is damaged, vandalized, or stolen. All the same, to get the best offers in the marketplace, it is prudent to request quotes from several insurance providers. You can get quotes from agents, online brokers, MoneyWizard, or your preferred insurance company.
At MoneyWizard, we can help you compare rates from different companies and narrow down your choices.
Frequently Asked Questions
1. Why do I need condo insurance?
There are several reasons for this. For instance, if you borrowed money to purchase your condo, your hands are tied. Your lender will likely stipulate in your loan that the unit must be insured immediately upon purchase. Also, some condominium associations require that every condo unit be insured. You have a choice of abiding by this condition or shopping for a new condo with no such condition.
2. What happens if your condo burns down?
Depending on the circumstances that led to the fire, either your condo insurance policy will kick in to cover the repair and replacement costs, or the condo association’s master insurance policy will cover the damage. This depends on where and how the fire started, especially if your unit was damaged by a fire that started in a neighboring unit. In these cases, assessors will determine which policy will take effect to cover your damage and get you back in your home.
3. What if I’m renting a condo?
A renter’s insurance does not provide all the perks of condo insurance to the tenant except for coverage such as theft and water damage, among other minor risks. In the case of a fire, condo insurance coverage often takes effect.
4. What’s the difference between condo insurance and homeowners insurance?
The main difference between the two policies is the amount of coverage they provide. Homeowners insurance takes care of both the interior and exterior of the house, including other structures like land, the garage, and other buildings on the property. In comparison, condo insurance is limited to the interior of the individual unit, your belongings, and perhaps liability coverage for visitors injured in your apartment.