Purchasing a condo is a process that involves many different steps. One step in the process that many do not think about is buying condo insurance.  While condo insurance shares similarities with homeowners’ insurance, there are some distinctive differences to be aware of when it comes to purchasing and insuring your condo.

Master Policies

If you buy a condo, it will inevitably be a part of a condo association, along with the other units in your building or complex. The association typically purchases an insurance policy that covers all of the units in the building or complex, known as a master policy.  The master policy insures the common areas shared by all owners, as well as part of the structure of your condo itself. The tricky part here is that not every master policy is the same.  Some will cover only the roof of your condo, others cover anything from the wall studs on out, and there are even some that will cover every part of the structure of your unit.

It is incredibly important to check with your association to make sure that they have a master policy and to find out what it covers; that way, you know how much insurance you need to cover on your personal policy. Even if the master policy covers every part of the construction of your condo, there are still coverages that you can only get through a condo policy.

Personal Property

One of the most important parts of carrying an individual insurance policy on your condo is the ability to cover your belongings through personal property coverage. No matter how thorough your association's master policy is, it will not provide coverage for the belongings you own. Your agent can help you with recommendations as to the amount of personal property coverage to add, but ultimately it is a good idea for you to take inventory of your belongings and the total value so that you have an idea of the level of coverage that you are going to need. If you are purchasing the condo as an investment and don't believe you need property coverage, think again. Having a condo as a rental property presents a different set of complications.

Loss Assessment

Another important aspect of carrying your own insurance policy on a condo is the consequences of what happens when your association files a claim on the master policy. Just like you have a deductible on your own condo policy, a master policy often has a deductible as well. The difference is that the master policy usually has much larger deductibles – sometimes hundreds of thousands of dollars. The association then splits that deductible between unit owners and charges you a portion, which could amount to thousands of dollars per property.  Luckily, there is a coverage on your condo policy for those potential out-of-pocket expenses. Loss assessment coverage will provide coverage if your association makes a claim on their master policy and charges you a portion of the deductible. Making sure you have enough loss assessment coverage to meet the master policy's deductible is another reason to make sure that you know what your association's master policy will cover.

Condos can be a great place to live or a great investment, but they do come with many peculiarities when it comes to purchasing condo insurance. Make sure to check with your association and your agent to make sure that you have the right amount of coverage for your condo before you buy.

Thinking of purchasing a condo? Contact Skyline Risk Management, Inc. at (718) 267-6600 for a free risk assessment.