Updated June 8, 2021
Reading time: 5 minutes
The insurance coverage you need can depend on your condo association’s master policy. However, if you have a mortgage, your lender will likely require you to have a specific amount of coverage.
If you live in a condominium, insurance isn’t always cut and dried. It’s trickier than standard homeowners insurance because condo unit owners need two separate insurance policies.
The first policy is your HOA ’s master policy, but that only covers the building’s structure and common areas. To protect your unit and your belongings, you’ll need condo insurance (also known as HO-6 insurance ).
When shopping for coverage, you may ask yourself, “How much condo insurance do I need?”
The answer? It depends. No single policy will cover you completely. However, these six questions will help you figure out the right coverage amount to protect you and your loved ones.
If you buy a condo, your mortgage lender will require you to have insurance. Your condo agreement may also instruct you to have insurance.
Two separate policies cover your condo:
The HOA ’s master policy covers the building and shared spaces (hallways, fitness rooms, HVAC systems, etc.).
Your individual policy covers the things inside your condo (your furniture, electronics, and personal belongings ).
To know how much condo insurance you need, you must first understand what the master policy covers. The more your master policy covers, the less insurance you’ll need for your individual policy.
A condo association policy can have one of three levels of protection:
Bare walls policy offers the least amount of coverage. It includes the exterior structure and framing of the building and your unit. It does not cover appliances and fixtures inside the condo.
Single entity coverage policy offers slightly more coverage. It can include everything needed to return your condo to its condition before the damage, such as appliances and fixtures.
All-inclusive coverage gives you the same protection as a single entity policy and includes any updates and improvements you may have made to the condo.
If your master insurance policy has all-inclusive coverage, you may only need enough condo insurance to cover the cost of replacing your belongings.
However, you’ll need more coverage if it’s a bare walls policy. That’s because you’re responsible for replacing appliances and fixtures inside your condo.
If disaster strikes, you want to make sure your condo insurance policy covers enough to rebuild your individual unit. This is the dwelling coverage part of your policy—it helps pay to rebuild or repair the physical structure of your unit.
You could ask an architect, contractor, or interior designer about the value of the dwelling. But you can also estimate the cost yourself.
For the DIY approach, multiply the total square footage of your condo by the local per-square-foot building cost. A local real estate agent, builders association, or insurance agent can help you determine construction costs for this estimate.
When calculating how much condo insurance you need, the building’s master policy plays a significant role. The less the master policy covers, the more insurance you’ll need.
For instance, let’s say you live in New York City, where the average price per square foot is $1,387. If your condo is 750 square feet, the approximate cost is just over $1 million.
So, if your master policy is single entity or all-inclusive, your $1 million condo insurance coverage could be enough.
But consider the impact if it’s a bare walls policy. In that case, you may need to increase your insurance coverage because the HOA ’s coverage doesn’t include appliances or fixtures inside your condo.
Your individual condo insurance needs to have a high enough policy limit to cover your personal possessions. The personal property coverage on your HO-6 policy can help pay to replace your furniture, clothing, electronics, and other personal items.
However, if you own expensive jewelry, fine art, or some collectibles, your insurer may put a cap on how much the policy will pay. You may need to purchase additional coverage for some of your more valuable items.
Your policy type is one factor that helps determine your insurance payout if you file a claim:
Actual cash value (ACV) pays the value of the items according to their condition at the time of the loss.
Replacement cost coverage provides the money you need to replace the lost items at today’s prices.
ACV factors in depreciation. It doesn’t provide enough to replace what you lost. Instead, you’ll need to take money out of your own pocket to help cover the cost.
On the other hand, replacement cost coverage can pay a higher amount to replace your damaged things. It is usually enough to cover the cost of items according to current market prices.
If you’re not sure what policy type you have, ask your agent or insurance representative. They can explain your policy terms and coverage limits to make sure you have enough protection.
You might be thinking, “What does the value of my assets have to do with how much condo insurance I need?”
But think about this: If someone slips and falls on your property, they may sue you for medical bills and other costs. Your condo insurance policy includes personal liability coverage to cover medical payments and lawsuits.
However, lawsuits can result in excessive settlements. Your cash, checking and savings accounts, cars, boats, real estate, timeshare, safe deposit boxes, and business ownership interests can all be part of the settlement.
Whatever liability protection you choose, make sure it’s enough to cover the value of all of your assets.
You may consider purchasing an umbrella policy. Umbrella insurance can increase your personal liability coverage over what your condo insurance offers.
This protection can be indispensable if someone injures themselves on your property and the claim is larger than what your condo policy will cover.
Condo insurance includes something called loss of use. Under loss of use, your insurance provider can pay for additional living expenses (ALE) if a covered peril makes your home uninhabitable.
For example, if a fire destroys your home, you won’t be able to live there while it’s being repaired or rebuilt. Your loss of use coverage can pay for hotels, rent, food, and other expenses until you can move back into your home.
How much condo insurance coverage you need depends on the cost to rent a similar condo.
The ALE limit for an HO-6 policy is typically 50 percent of the personal property limit. Depending on the cost of living in your area, you may need to increase your personal property coverage.
Coverage can kick in if a hazard damages or destroys your home or belongings. But keep in mind that insurance only covers certain perils. Fire, lightning strikes, vandalism and theft, and bad storms are common perils that condo insurance covers.
But what if flooding, earthquakes, or wildfires are common where you live?
Check with your insurance company because you may need to buy add-on coverage or other catastrophe insurance products for protection from some disasters.
For instance, flooding is a common exclusion in condo insurance policies. Instead, you must purchase flood insurance to get coverage for water damage caused by flooding.
A homeowners insurance policy isn’t the right insurance for condo owners. Instead, you need a condo insurance policy called HO-6 insurance to cover your condo unit. Your condo association will also have a master policy, but it doesn’t cover damage to your individual unit.
Yes. If you have a mortgage, your lender can stipulate the amount of condo insurance you need. Your condo association may also require you to buy condo insurance. Coverage can pay to rebuild the interior of your condo unit, replace your furniture and other personal possessions, and offer liability insurance coverage if someone sues you after being hurt in your home.
The amount of condo insurance people need varies. Consider the cost to rebuild your unit, the coverage your HOA’s master policy includes, the value of your personal property, and the perils your policy includes.
Condo insurance covers many of the same perils that a home insurance policy includes. Fire, lightning strikes, vandalism and theft, and bad storms are typically covered. But policies can vary, so check with your insurance company if you aren’t sure.
The average cost of an HO-6 condo insurance policy is $506 per year. How much you pay can depend on your unit’s value and the amount of personal and liability coverage you buy. Comparing insurance quotes from several companies can help you find cheaper coverage. You can also lower your premiums by bundling your condo policy with auto insurance and increasing your policy deductible.
If you live in a condo or are buying one, you need condo insurance. Coverage is crucial to protect you from financial devastation if a disaster happens. Plus, many lenders and condo associations can require you to buy a policy.
To make sure you have the protection you need year after year, revisit your policy to update your coverage. Inflation and rising costs of living may require you to increase your coverage limits.
Above all, take your time when shopping for condo insurance. Because your home is a substantial investment—financially and emotionally—you want to feel comfortable with your decision. Talk with neighbors, ask your HOA, and get recommendations from local contractors.
When you’re ready to buy, compare insurance rates online to ensure you get the best coverage at the best rate. Check out Insurify today to learn more about condo insurance, and compare home insurance options.
Amy is a personal finance and technology writer. With a background in the legal field and a bachelor's degree from Ferris State University, she has a talent for transforming complex topics into content that’s easy to understand. Connect with Amy on LinkedIn.Learn More