How much condo insurance do I need?

What is HO-6 condo insurance?

An HO-6 policy is a home insurance policy specifically for condominiums. It may also be called condominium homeowners insurance or condo owners insurance. HO-6 is a code used by insurance companies to identify the different types of home insurance. Unlike standard HO-3 home insurance, HO-6 insurance typically only covers things inside your unit.

The biggest difference between HO-3 and HO-6 policies is that a homeowners insurance policy provides coverage for the structure itself. HO-6 condo policies don’t need that coverage since the structure is covered by the condo association. However, some portions of the unit's interior may be covered by your policy, so ensure you know how much dwelling coverage you need. An HO-6 condo policy also includes liability coverage.

How much condo insurance is enough?

You need enough condo insurance to cover all of your personal property, including high-value items and for any parts of the unit for which you're responsible. It's best to accurately calculate the value of your property and the building property you're responsible for insuring. Check with your condo association to find out what type of building property coverage you need, if any.

You'll also need enough liability insurance to protect your assets in a lawsuit. The standard condo insurance policy includes $100,000 in liability, but experts recommend at least $300,000.

If your condo is subject to bare-walls rules, assigning a replacement value to the interior can be challenging because the value of your individual condo is partially based on the common features – such as the building exterior, as well as a swimming pool and other amenities.

The exact dollar amount of coverage you need also depends on other factors, such as:

• Construction costs in your area
• The type of materials used in your condo
• The value of your personal possessions

If you're struggling to put a dollar figure on the amount of coverage you need, talk to your insurance agent. Powell says it is always better to buy too much coverage rather than not enough.

Condo insurance deductibles

Rather than cutting corners on coverage, consider choosing a higher deductible, which can lower your premium. The deductible is what you pay toward damages when you file a claim.

Deductibles apply to the personal property coverage portion of your policy. You typically have a range of deductible amounts from which to choose.

Actual cash value versus replacement value

One typical mistake condo owners make is buying coverage that reimburses the actual cash value of their belongings instead of a policy that covers the replacement cost. Actual cash value typically means your belongings are covered for their replacement cost minus depreciation. Depreciation is the decrease in an item’s value due to its age, condition or other factors. Replacement value means your belongings are covered for the amount it would take to replace them at the time of the claim.

Loss assessment coverage

This coverage reimburses you if the condo association charges a one-time special assessment fee to unit owners to cover costs that exceed the coverage limits of the association's master policy.

Loss assessment coverage is part of most condo policies but typically provides just $1,000 in coverage. If this is the case with your policy, Powell urges you to purchase additional coverage. Special assessments sometimes can soar into thousands of dollars.

"Most people should buy $5,000 or $10,000 at a minimum," Powell says.

Liability coverage

Most people think of condo insurance as protection for their homes and belongings. But condo policies also include liability coverage, which protects you if someone is injured inside your home.

Don't skimp on this coverage because you'll be sorry you did if someone is hurt on your property, says Lori Conarton, spokesperson for the Insurance Alliance of Michigan.

"Many times, it will be a minor injury," she says. "But other times, you may be sued, and liability insurance will provide coverage for you."

Typically, the minimum condo liability limit is $100,000, but that doesn't offer much protection should you end up on the wrong end of a lawsuit. Liability coverage can go as high as $500,000 – and in extreme cases, even that might not be enough.

Fortunately, there is an easy way to get even more protection. "Condo owners can also purchase an umbrella insurance policy that provides additional protection of $1 million or more for both their condo insurance and their auto insurance," Conarton says.

Buying a "bare bones" policy or even something with middling coverage to save money in the short term can be risky over the long haul.

"Lawsuits can be very expensive," Conarton says. She says the average judgment in slip-and-fall cases is $100,000, and the average cost to defend a liability lawsuit is $50,000.

Judgments could go much higher if somebody is severely injured or even killed.

"Without liability insurance, the results of a lawsuit could be devastating financially to you," Conarton says.

How does condo insurance work?

Although condo insurance coverage differs from a standard homeowners policy in terms of what is covered, it works in much the same way.

You will have specified coverages and deductibles listed on the declaration page of your HO-6 policy. For these coverages, you will pay an annual premium. If you need to file a claim, you will be responsible for the deductible when it applies.

Like homeowners insurance, condo insurance rates are determined by various factors, including but not limited to claims history, your credit score (depending on the state), the age of the condo, and location.

How to determine how much coverage you need

Before you can figure out how much condo insurance coverage you need, it's essential to determine what your condo association's master policy covers.

In most complexes, the condo association’s master policy protects the exterior of your unit.

It also protects other parts of the condo community, including common areas such as hallways, party rooms, workout areas, and a pool, if there is one. You pay for this coverage through your condo association dues.

Before buying condo insurance, review your condo association policy to find out what the condo association's master policy covers and what the condo owner's policy (your policy) needs to cover.

You should be able to get this information from the condo board or from the company that manages your building. 

Figuring out what is and is not covered by the association policy can be tricky because the rules differ from community to community. Here are the three different types of condo association policies and the coverage they offer -- from the most protection for the unit owner to the least protection:

All-in and all-inclusive. Protects all individual units’ exterior and interior surfaces, including fixtures, installations, and additions. The individual condo owner is still responsible for personal property.

Special entity. Covers nearly all of the condo structure, which includes original fixtures in units. This coverage doesn't include structural improvements or unit additions. The condo owner is responsible for personal property coverage.

Bare walls in and wall studs in. Covers only the bare structure. You will need to insure all of your condo’s interior contents, including bathroom and kitchen fixtures and countertops, as well as your personal property.

Knowing what the master policy covers can help you purchase the right individual condo insurance policy coverage, says Doug Foulks, personal lines products manager at Van Wert, Ohio-based Central Insurance Companies.

When looking over your policy, check for phrases such as “all in, “all-inclusive,” “special entity, “ “bare walls in” and “wall studs in.” These phrases tell you the level of coverage that the HOA policy provides.

"Sometimes they are easy and straightforward and other times they can be complex, where you almost have to be a lawyer" to understand them, Foulks says. 

Now that you know what the condo association master insurance policy covers, you can determine how much and what types of condo insurance coverage you'll need to fill any gaps.

What does condo insurance cover?

The recommended condo insurance coverage includes building property, personal property, personal liability, additional living expenses (loss of use), and loss assessment.

In many cases, the HO-6 policy provides protection for damages to interior walls, floors and ceilings. It normally covers damage caused by:

• Fire
• Weather (in some areas, hurricane damage requires additional coverage)
• Theft
• Vandalism
• Smoke damage
• Frozen pipes

Building property coverage

Condo insurance doesn’t have dwelling coverage like a standard homeowners insurance policy. Instead, the coverage is usually called building property coverage (some policies may still use the term dwelling). The condo association master policy is often responsible for the exterior of the condo and the condo owner's HO-6 policy kicks in for interior things like:

• Floors
• Cabinets
• Carpets
• Fixtures
• Interior walls
• Countertops

If a pipe in your condo freezes and bursts, building property coverage will kick in to repair or replace the damaged interior up to your policy coverage limits. Some condo associations don’t require you to carry this coverage.

Personal property coverage

Anything that you take with you when you move is covered under personal property coverage. Here are some examples:

• Furniture
• Linens
• Appliances
• Electronics
• Jewelry
• Clothing
• Artwork
• Dishes, pots, and pans

Keep in mind standard condo insurance has limits on certain valuables, such as fine art, antiques, jewelry, and electronics. So, you might need to purchase an endorsement or "floater" to provide additional coverage for certain items.

Using the same example of a burst pipe, if the burst caused flooding and water damage to your personal property, the personal property portion of your condo insurance policy would kick in up to your coverage limits.

Personal liability coverage

Condo insurance also provides personal liability protection. That means you will be covered for injuries or damage you cause to someone else.

Make sure you select liability limits that are enough to protect your assets. Liability insurance often ranges from $100,000 to $500,000. You may want to explore a personal liability umbrella policy if the liability limits aren't high enough.

If someone falls while visiting your property and suffers an injury to their person or property and that damage results from your negligence, personal liability coverage will kick in to pay for repairs, legal costs and medical bills.

Additional living expenses or loss-of-use coverage

Many condo policies also provide additional living expenses coverage in case your condo is damaged to the point that it is temporarily uninhabitable. For example, if a fire damages or destroys your unit, it will be necessary for you to live elsewhere, at least temporarily. Additional living expense coverage kicks in to help pay extra living expenses like hotels and food while you can’t use your home.

Loss assessment coverage

Condo owners should also look into loss assessment coverage, which helps pay for condo association-related incidents. As a condo association member, you collectively own the common areas. You may need to pay extra as an individual condo owner if:

• Claims exceed the association’s policy limits or you are required to contribute to a hefty deductible.
• Losses occur that are not covered by the insurance policy, such as when the HOA policy does not cover injuries from a pool slide.

"Depending on the type of loss, the condo association can go back against the condo owners [to cover a loss] and everyone would have to pay their part," Foulks says.

If the condo association's loss assessment policy isn't expansive, additional loss assessment coverage offers good protection for condo owners, he says.

Check your HOA master policy to determine the association’s coverage limit. Make sure to pay attention to whether or not there are special deductibles for certain hazards.

Calculating how much condo insurance you need

Condo insurance is more complicated than regular home insurance because of the different types of HOA policies and regulations.

You may need more HO-6 insurance if your HOA policy is for “bare walls” or “wall studs in.”

You must decide how much condo coverage is necessary to protect your belongings and interior features, such as wood floors, kitchen cabinets, and fixtures. Take stock of the interior items in your condo unit, including furniture, clothing, and electronics. Don’t forget to record any expensive artwork.

"People tend to underestimate the cost to replace all the stuff," Schaum says. "We are not talking about what it's worth today, but what it costs to replace it new."

Replacement cost coverage is more expensive than cash value coverage, but you'll be glad you paid the extra if you suffer a major loss.

Also, figure out what level of liability insurance you need. If your assets are more than $500,000, you may want to look into an umbrella policy. Don’t skimp on liability insurance. For little money, you can be properly protected.

Look into loss assessment coverage so you can protect yourself in case someone is injured in a common area or the exterior of the building is seriously damaged. Loss assessment coverage is especially important if your condo association has a hefty deductible (some plans have $50,000 deductibles) and your complex may have risky items not covered by an HOA policy, such as a pool slide or diving board.

Finally, it might make sense to add some other coverages, such as:

• Water backup coverage. This protects you in case a sewer or drain backup causes water damage to your unit. Neither a standard condo policy nor flood insurance provides this protection.
• Additional coverage for valuables. You may be able to purchase a floater that will give you higher coverage limits for jewelry, collectibles, and other expensive items that a typical HO-6 insurance policy would not adequately cover.
• Flood insurance. Like regular homeowners insurance, a regular condo insurance policy doesn't protect you against flood damage. You will have to buy a separate flood insurance policy.

What is the rule of thumb for condo insurance?

There are no hard and fast rules when calculating condo insurance needs since every condo is a little different and association coverage varies. However, when calculating how much dwelling coverage (building property coverage) you need, a good rule of thumb is to insure it for 20% of the condo’s total value.

Of course, you might need to consider upgrades and high-end fixtures to ensure your numbers are accurate.

Make sure you have enough condo insurance

It’s not uncommon for condo owners to be underinsured. Take the time to carefully calculate how much coverage you need, particularly when it comes to your personal property. It’s easy to underestimate how much it would cost to replace everything you own.

Your condo is your home, and you want to protect it properly, so ensure you understand your needs before buying a policy.

Methodology

Insurance.com commissioned Quadrant Data Services in 2022 to field rates for condo insurance in every state with personal property limits ranging from $40,000 to $100,000, a deductible of $1,000, and $300,000 in liability coverage.