Amy had just bought her first condo during the height of hurricane season.
When a category 4 storm came through town, her unit was completely flooded. Amy called her insurance company, only to discover her condo policy didn’t cover flood damage.
If only she had known to take out a separate flood policy provided by FEMA, then Amy could have the coverages she needed to make repairs. Now she’s stuck paying for a condo that she can’t even live in.
Are you getting ready to become a condo owner for the first time? Then it’s time to become an insurance expert, and this guide can help. We’ll show you what coverages you need, and how to set the right limits.
Read on to learn everything you need to know about condo insurance.
Dwelling Insurance for Your Condo Policy
Dwelling coverage is the most crucial aspect of your condo policy. Dwelling is what will protect the structure of the unit.
Dwelling coverages will also help cover any upgrades that you pay for. For instance, custom hardwood flooring and built-in appliances would go under your dwelling coverages.
The amount of coverage you need will depend on what your HOA policy already covers. If you live in a unit that has a condo association master insurance policy, you might not need to purchase dwelling coverage.
Reach out to the onsite coordinator at your condo to find out what their policy does and doesn’t cover. Once you’re certain that you need dwelling coverage, you’ll need to speak to a licensed agent about setting the appropriate limits.
Replacement Cost and Condo Value
How will a licensed agent determine how much coverage you need? It’s all going to come down to a replacement cost calculation. Replacement cost is the amount it would take to entirely replace your condo unit.
It’s helpful if you could get an estimate for my contractor about the value of your unit. Even if they cannot give you an exact estimate, they could at least provide you with the benchmark for the square footage pricing.
You can also reach out to mortgage lenders to get estimates about the value of your dwelling. Sometimes the mortgage lender we’ll have a specific amount of dwelling coverage that you have to carry no matter what.
Getting Condo Dwelling Coverage Quotes
If your mortgage lender doesn’t have a requirement and you don’t have an evaluation from a contractor, you’ll need to be creative during the quoting process. Get quotes for different levels of dwelling coverage ranging from $100,000 and up.
Sometimes you’ll find that the differences between thousands of dollars worth of coverage only cost a little bit more. By getting multiple quotes, you’ll be able to budget accordingly for your new condo.
When the day comes that you have to pick a policy, let the insurance agent help guide your decision. Even though insurance agents are sales professionals, they’re still going to have your best interest at heart. Insurance agents are legally required to make smart recommendations that will help you be fully covered.
You’ll never have to worry about an agent trying to cut corners to get you a better price. That is as long as you’re dealing with a reputable insurance provider in the first place. Make sure you’re only working with insurance providers who have an excellent reputation and can offer you a fair price.
Covered Loss for Dwelling Coverage
Will any type of damage to the structure of your condo be covered under dwelling protection? Not necessarily. In order for your insurance to kick in, you have to experience what’s considered a covered loss.
A covered loss or peril would include a lightning strike, wind storm, or damage from a fire. Other examples of covered perils include explosions, riots, smoke, vandalism, falling objects, hail damage, and even volcanic eruptions! If any of these perils damages your condo, you’ll need to file a claim with your insurance company.
As long as it’s a covered peril, the insurance company will be able to reimburse you for your loss. However, keep in mind that you’ll only have coverage up to the dwelling coverage limit of your policy.
Once the insurance company pays to have the structure fully repaired, they’re not offering you any more money for the dwelling. However, you can take advantage of other insurance coverages like personal property.
Personal Property Coverages
So far, we’ve been discussing coverages that will help replace the condo unit. But what about all of your belongings? Can your insurance policy help cover these as well? Absolutely!
Personal property coverage is one of the most complex aspects of starting a new policy. At first glance, you might not think that you have a lot of property to insure. However, once you start making a personal inventory, you’ll realize you have more things than you originally thought.
Take a moment today to start writing down a list of all your belongings. Be sure to include all of your electronics, instruments, and sports equipment. Don’t forget to write down your jewelry, antiques, and any art items you might have.
As you look at your list of belongings, you’ll probably realize that you have thousands of dollars worth of stuff. Even if you only have $5,000 value of belongings, that can be a lot to replace.
Over 25% of all fires take place in a residence. If a fire destroys all of your belongings at once, would you have $5,000 to replace everything right away?
You need extensive personal property coverage if you’re moving an entire family into the condo. Talk to your insurance agent about setting the proper limit for your personal property.
Special Jewelry Riders
Do you have an extensive jewelry collection? Then you’re going to need to get special coverage.
Your standard personal property coverage will have a limit when it comes to jewelry. For instance, your insurance provider may cover a jewelry loss, but only up to $1,000.
We suggest getting an insurance rider if you have any type of valuable jewelry collection. The rider will be a particular type of coverage that helps extend your policy. You can get riders for things other than jewelry as well.
Musical instrument collections, art collections, and even large amounts of cash can all be insured. To get some of the best insurance riders, you’ll need to work with top-of-the-line insurance providers.
Personal Liability Coverages
At this point, we’ve discussed coverages that help pay for replacing the condo itself and your belongings within it. Now, it’s time to start talking about liability coverages.
Liability coverages help protect your finances. Similar to auto insurance, liability is the coverage that helps if somebody tries to sue you.
Let’s say, for instance, that you have a friend over to your condo. While they’re visiting, they slip and trip on a puddle of water in your kitchen. Your friend has to go to the hospital, and they rack up a large emergency room bill.
If that friend decides to request funds from you to pay for their medical bills, your condo insurance can help save the day. Instead of putting your own money on the line, you’ll be able to tap into your liability coverages. Liability coverages provide legal coverage for different legal expenses from lawsuits or claims brought against you.
Loss Assessment and Loss of Use
Remember how we said that your condo association would have its own insurance policy? The condo association’s policy is the master condo policy. If the coverage in the master policy maxes out, your loss assessment coverages can help cover things.
For instance, let’s say that a major fire rips through the units on your floor. There’s extensive damage, and the damage exceeds the coverage limits in the condo association’s master policy. Now your loss assessment coverages can step in to help pay off the existing fire damages.
Loss of Use
There’s also a loss of use coverages. Loss of use coverages will help pay for living situations if you can’t stay in your condo unit.
Using the example earlier, if there’s a major fire, you probably won’t be able to stay in your condo. Instead, you’ll have to live somewhere else while the repairs take place. Since repairs can take weeks or even months, the expense of living somewhere else can add up quite quickly.
Thankfully loss of use coverage will help pay for living accommodations, including hotels or airbnbs. The amount of coverage you get will depend on what you set up with your insurance company.
Have the Condo Insurance Coverages You Need
You deserve a condo policy that gives you peace of mind. Since calculating coverages can be tricky, reach out to an insurance agent today. Let them walk you through the different coverages that you’ll need so you can explore all of your options.
Remember to get multiple quotes and play with the coverage limits. Don’t skimp out on your personal property or liability coverages either. It’s amazing how high you can set the liability limits without spending a lot more.
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