If You Have a Mortgage, You’ll Need Condo Insurance
When you buy a condo, you might be wondering if condo insurance is mandatory. It’s not an apartment, so you don’t have to pay renters insurance, right? That’s correct. And it’s not a house, so you don’t have to get a homeowners insurance policy, right? Not quite.
If you have a mortgage on the condo, a condo insurance policy will be mandatory. Your lender will require you to insure the property — just as if it were a single family home — in the event something happens to the condo while you’re making payments. Getting this insurance is part of the financing process and can also be included in your overall closing costs.
Understanding the Types of Condo Insurance
First, let’s review the insurance policies the condo association has in place. Much like a homeowners association, your condo association is responsible for the building as a whole, the interior common areas, the financial well-being of the association, and many other things.
The association’s bylaws, or rules that cover how the association is managed, is where you should start. Review your association’s policy as well as its master policy to determine what the association is responsible for insuring and what they require you to insure.
The association itself may have one of these common insurance policies in place, which determines the level of coverage you need to get:
- All-in: Everything is covered — the building, common areas, interior surfaces and fixtures, and even parts of the unit that you upgrade yourself
- Single entity: Everything is covered except for any unit upgrades and improvements you make as well as your personal property.
- Bare walls: Only the building’s basics are covered, such as walls, roof, floors, etc. You’d be responsible for insuring the interior as well as your personal belongings.
Now that you know what the association covers, you can begin to determine what condo insurance you’ll need. Here are some considerations for your condo insurance policy:
- What are you responsible for covering apart from the association master policy?
- If your condo’s interior isn’t fully covered, how much would you need for repairs?
- If you make improvements that aren’t covered, how much do you need for replacements?
- Assess the value of your personal property. How much coverage do you need?
- If someone was injured on your property, how much do you need for liability?
- If your condo were made uninhabitable, how much would you need for living expenses?
These are important things to consider and discuss with a licensed insurance agent. Share the association’s master policy with your agent to ensure there are no gaps in coverage and that they can tailor the right policy for your needs.
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