When buying a condominium, you may think that the condo association's policy will protect your personal belongings.
However, this is not the case.
Condo corporation coverage is limited to the building and common areas. If your belongings are stolen, it will not compensate you. Luckily, condo insurance is does. Let's learn more.
What is Condo Insurance?
Condo insurance is a legally-binding contract between you and an insurer. In exchange for regular premium payments, the insurance company promises to provide you with compensation if your personal belongings (inside the apartment) are stolen or damaged. It also pays out if someone sues you for unintentional bodily injuries experienced in your unit.
A standard condo insurance plan includes:
- damage or loss of your personal property
- personal liability coverage
- additional living expenses if you need to temporarily live elsewhere due to an insured loss
- some unit betterments and improvements
What Does Condo Insurance Cover?
What is covered by a personal condo insurance policy varies depending on the insurance company. A typical condo insurance policy can include:
- All-Risk Coverage
It protects your personal property in the condo. If your possessions are damaged and you are not at fault, the insurance company compensates you up to the policy limit. For example, if your furniture is damaged as a result of the toilet in the condo unit above you overflowing, your policy covers the damage.
A standard condo insurance policy will also cover theft by forced entry. For instance, if a thief breaks into your home while you are at work and steals your jewelery, the plan will cover the cost of replacing the stolen item(s).
Condo insurance, like all insurance contracts, usually has a few exclusions (defined as things that the insurer will not cover, like certain risks, perils, actions, and types of property). Common exclusions include:
- Theft of personal belongings by unforced entry. For example, if you throw a party and later find that your iPhone is missing, insurance will not cover the claim.
- Damage caused to an item due to wear and tear.
- Damage caused to your belongings after your property has been vacant for a certain period, like 30 days.
- Personal Liability Insurance
It protects you if someone sues you for unintentional bodily injuries sustained in your condo. For example, if a guest slips on your newly-waxed floor, breaks a hip bone, and now cannot work for an extended period.
- Additional Living Expenses
It covers out-of-pocket expenses like lodging and food if you are forced to leave your condo temporarily because of a covered event. For example, if your condo is damaged by afire and you have no choice but to move into a rental home, your policy will pay for lodging, food, and moving expenses (up to the policy limits).
- Car break-ins
Condo insurance covers not only belongings that are inside your home, but also those stored in your car. If someone breaks into your car and makes away with your golf clubs, it is your condo insurance — not your auto insurance — that will pay to replace them.
What Does Condo Insurance Not Cover?
Typically, condo insurance does not cover the following:
- Flood: Your Condo insurance will not provide coverage for water damage caused by a flood.
- Car damage or theft: You cannot count on your condo insurance policy to provide compensation in the event of vehicle theft or damage. These situations are covered by your auto insurance, but only if you have comprehensive coverage.
- Your tenant’s belongings: If you have rented your condo to someone else, your condo insurance will not cover damage to your tenant’s belongings, like electronics, furniture, and other personal property. Your tenant will need to buy their own renter’s insurance.
How Much Does Condo Insurance Cost?
How much you will pay for condo insurance depends on many things, such as:
Your condo association’s coverage
Your condo association has its own insurance, which can be either basic or comprehensive. A basic plan covers only the building — elevators, floors, roof, wall — and common areas such as the gym or lobby. In contrast, a comprehensive master plan also covers basic items within each apartment, like interior walls, cabinets, carpets, and appliances.
The type of coverage your condo association has will affect the cost of insurance for you. A bare-bone policy means you will need to cover more items inside your condo, which will increase the cost.
Amount of coverage you want
Condo insurance is primarily concerned with the contents of your condo, such as furniture, electronics, television, clothing, and so on. That is, if you own fewer items, you will require less coverage and will pay a lower premium. However, if you have a lot of belongings, your insurance costs will be higher.
Replacement cost or actual cash value
Your coverage cost also depends on how you will be reimbursed if your personal property is damaged or stolen. Depending on your policy, you may either receive the replacement cost of a damaged or stolen item or its actual cash value.
The replacement cost coverage pays you to replace an item with a similar kind and quality. For example, if your 3-year-old music system is stolen, the claims payment will allow you to buy a new system having similar features to the one you lost.
The actual cash value coverage pays you the depreciated value of your damaged or stolen item. Continuing with the above example, a condo policy that provides actual cash value will pay you the current value of your music system in its used condition.
Since an actual cash value policy takes depreciation into consideration, it pays less compensation and as such is cheaper to buy.
A deductible is a specific amount you must pay out-of-pocket before your insurance carrier pays its share of a covered loss. Deductibles can be either a certain dollar amount or a set percentage of the total policy amount. The higher the insurance deductible, the lower your insurance cost will be.
In the eyes of an insurer, an applicant who has filed multiple claims is a greater financial risk than someone with a claim-free status. Put simply, more claims equals higher premiums.
Age of your building
New condos may be cheaper to insure as they are more likely to have the latest security features, which insurance carriers prefer.
Do I Need Condo Insurance?
Condo insurance, while not mandatory, is highly recommended for all condo owners. It protects you when your condo corporation's coverage cannot.
For example, if someone sues you for bodily harm sustained in your apartment, condo insurance can assist in covering legal fees as well as the claim amount. Without condo insurance, you would have to pay these costs out of pocket, which could easily exceed a few thousand dollars.
If your personal belongings inside the apartment are damaged or stolen, your condo insurance will come to your aid. For example, if a burglar breaks into your condo and steals your new smart TV while also breaking an antique vase and china set, your personal condo insurance, not your condo association's policy, will pay to replace the stolen and damaged items.
Even if your condo association has a comprehensive master policy, you will most likely need a personal condo insurance plan. While the latter covers basic items inside your condo, it does not cover any improvements you have made to it. So, if you bought a high-end refrigerator and it was damaged in a fire, the master policy will not cover the cost of replacing it.
How is Condo Insurance Different from Home Insurance?
Both condo and home insurance offer personal liability coverage and protect your personal belongings inside the apartment from various risks and perils. However, they are different in many ways.
The key difference is that, unlike home insurance, condo insurance does not cover the whole structure of your home. Instead, it only covers certain betterments and improvements you make within your apartment.
Condo insurance offers liability coverage and pays to replace or repair damaged or stolen personal belongings inside your unit. While it is not required by law, condo insurance is highly recommended for all condo owners.
Dundas Life can help you secure the right condo insurance plan at an affordable price. Reach out to learn more.