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Many people choose condo life as a bridge between apartment rental and moving into a single-family home in the suburbs, while others prefer condominiums because they combine the tax benefits of home ownership with amenities like pools, saunas, and clubhouses that they don’t have to pay to maintain. A third group of people downsize from larger homes to condos as their children grow up and leave home, minimizing their care and maintenance responsibilities. One thing that each of these types of condo dwellers have in common, though, is the need for insurance.

As a condominium owner, HOA (homeowners association) dues are a fact of life, and if you assume that these fees go, at least in part, to cover the insurance premiums on the complex, you’re correct, but the master insurance policy on your condo isn’t quite the same as a basic homeowners policy.

Master Policies:

Most condo complexes are covered by master insurance policies which cover the structure of each building down to the thickness of the interior paint on any walls, and all common areas. If the condominiums are located in a flood zone, the master policy usually includes the required flood insurance, as well. In addition the master policy includes liability coverage on the officers of the HOA.

What this means to a you as a condo owner is that if your building catches on fire, the HOA insurance will rebuild the structure, but in most cases your belongings, including wallpaper or anything else other than paint on the walls, are not covered.

Owners Policies

How do you protect your belongings then? You’ll need a special condo owners policy. In some ways, such a policy is more like renters insurance than homeowners insurance, because it covers primarily the contents of your home, but such policies also include some liability coverage, in case of accidental injury to guests in your home. There’s a morbid joke in real estate circles, that if anyone is going to trip and fall while visiting you, they should make sure to land outside your front door, so that the master policy covers their injuries, rather than your own.

While insurance on the contents of your condominium is not required for financing, it’s still a good idea, especially if you own jewelry, electronics, art, or antiques.

When You Purchase a Condo

When you purchase a condominium, your lender will generally require some kind of HOA worksheet that specifies the number of units that are rented or owner occupied, explains the insurance coverage, and states whether or not there have been any claims. It is this sheet that is provided to the lender, along with a copy of the master policy declaration page, to prove to your lender that you have the required coverage. In some cases, the seller pays for this form to be completed, in other cases, it is the buyer’s responsibility, but it’s never terribly expensive.

If you absolutely cannot afford to insure the contents of your condo, you will still be able to close your loan, and the building you live in will be covered, but a condominium owners policy is the best choice you can make, and in most cases you can get the same kind of auto/home discounts that you would for a policy on a single family home.