Anyone that has recently purchased a condominium will need to spend some time exploring their options for condo insurance. While these homes are often smaller than a full-sized house, the insurance policies can be even more complex. Here is a closer look at some of the unique aspects of these policies and what exactly will and will not be covered.
The Master Policy
Unlike owning a larger home and the property that it is on, those that own a condo will only own very specific parts of the property (if any at all) and only certain components of the actual building that they live in. All of this is determined by the master policy for the condo complex. The master policy describes what is covered by the community managers and what each individual owner is responsible for. Community property such as parking lots and pools often require a deductible from each resident in order to operate and insure.
What is Covered?
There are two primary forms of condo ownership. The first is referred to as bare walls-in, and it will require a slightly larger insurance policy. This type of ownership means that the resident owns the actual structure of the building, but they might not own things like the kitchen fixtures and the flooring. For these owners, the policy must be larger in order to accommodate for the rebuilding costs in the event of an accident. All-in ownership, on the other hand, means that the resident only legally owns what is physically inside the walls of their home. They are responsible for insuring things like appliances and countertops, but not the roof, foundation, or exterior walls.
Cash-Value or Replacement-Costs
After you have established exactly what you own and are responsible for, you will then need to decide if you would like a cash-value policy or a replacement-cost policy. A cash-value policy is determined by the original price of a possession minus the depreciation. This will mean less insurance money after an accident has occurred, but also lower premiums. Replacement-cost policies will provide insurees with enough money to replace their possessions with an updated product.