Condominium (HO-6) insurance is a type of homeowners policy designed for the needs of condo unit owners. It provides coverage for the parts of your condo unit that are not insured by your association’s master policy. It also covers your personal belongings and provides personal liability insurance. It will even help you pay for living expenses if you have to find temporary lodgings while your condo is being repaired.
What does “HO-6” mean? This is simply part of a labeling system used by the insurance industry to denote different kinds of homeowners insurance policies. For example, HO-3 is a common type of insurance for single-family homes, HO-4 is insurance for those who rent, and so on.
What’s covered under a condominium (HO-6) insurance policy
When you have a condominium (HO-6) policy, your insurance company provides reimbursement if any of several “covered perils” occurs. These covered perils are outlined in your policy contract, and usually include events such as fire and smoke, windstorms and hail, theft and vandalism, and damage caused by ice, snow, and sleet.
A condo (HO-6) insurance policy provides five types of coverage. Each of these coverages has a limit, which is the maximum amount your insurance company will pay for a claim. When you purchase your policy, you can choose limits based on your needs.
- Dwelling — Pays to repair or replace permanently affixed parts of your unit for which your condominium association’s policy is not responsible (more about this below). For example, if a kitchen fire damages your cabinets, drywall, and wood flooring, your dwelling coverage ensures your insurance company pays to have those things repaired or replaced.
- Personal property — Pays to repair any personal belongings damaged or destroyed in a covered peril. These might include things such as furniture, electronics, clothing, and sports equipment. Dwelling and personal property coverages typically have a deductible. The deductible is a dollar amount you choose when you purchase your policy, representing your “share” of the cost of a claim. Let’s say, for example, you have a $1,000 dwelling deductible. A fire causes flame and smoke damage to your unit, and a contractor estimates the repairs will cost $5,000. Your insurance company sends you a check for $4,000 for the repairs, leaving you responsible for the final $1,000.
- Personal liability — Pays for any property damage or injuries to others for which you’re responsible. For example, if a party guest slips and injures his back in your condo then sues you for the cost of his medical care, your personal liability would provide coverage.
- Loss of use — Pays for any additional living expenses you incur if you’re forced to find temporary living arrangements while your condo is being repaired due to damage from a covered peril. So this may cover things such as the cost of a hotel or apartment, restaurant meals, and laundry services.
- Loss assessment — Helps you pay your share of any assessments arising out of an accident or other incident in a common area of your condominium complex. Such incidents are typically covered by your condo association’s insurance. However, if the cost of the incident exceeds that policy’s limits, the association will levy an assessment, which passes those excess costs on to you and the other unit owners.
Condo (HO-6) insurance vs. your association’s insurance
In many ways, condominium (HO-6) insurance is similar to a standard homeowners policy. But there’s one key difference. Whereas a standard homeowners policy provides coverage across the entire property, a condominium policy provides coverage only for the areas of the property for which you are responsible.
In other words, common areas such as lobbies and walkways, exterior stairs, green spaces, roofs, exterior walls, and framing are covered by your condominium association’s insurance policy. Your owned unit is covered by your condo (HO-6) policy. You may hear the phrase “from the drywall in” to describe what a condo (HO-6) policy covers. That means it provides coverage literally for your drywall and everything inside of it.
This is by no means universal. Some association policies are more generous and do provide “all-in” coverage for parts of your owned condo unit. But as a general rule, you can expect to need a condo (HO-6) policy that provides coverage “from the drywall in.” Your condominium association bylaws should explain what is and isn’t covered by its policy.
What’s not covered under condominium (HO-6) insurance
Another similarity between standard homeowners (HO-3) insurance and condo (HO-6) insurance is that both policy types feature a list of exclusions. These are specific perils or items that the policy does not cover.
Two of the most significant excluded perils are earthquakes and flooding. Coverage for earthquakes may be available from your insurance company as a policy rider (an optional coverage), for an additional cost. Flood insurance, meanwhile, is provided through the National Flood Insurance Program, which is run by the U.S. federal government. You can contact your insurance company or agent to learn more about how to get these coverages.
It’s also common for a policy to not provide coverage if the condo is vacant for an extended period of time, usually at least 30 days. If you use your condo as a part-time residence, or just plan to be away for more than a month, contact your insurance company or agent to discuss vacant condo insurance.
Finally, your condo (HO-6) policy may exclude some of your personal property. These exclusions include high-risk, high-value items such as expensive jewelry, furs, fine art, firearms, expensive electronics, and antiques. Again, just because your condominium policy excludes these items doesn’t mean you can’t buy coverage for them. An insurance agent can explain your options to help you get the coverage you need.
What condo (HO-6) insurance costs
According to data from the National Association of Insurance Commissioners, the average annual premium for a condominium (HO-6)policy is $506. The price of an individual policy will vary based on a number of factors. Condos in areas with higher crime rates, or in areas that tend to experience natural disasters such as hurricanes or wind damage, may cost more to insure.
Your premium will also be affected by the amount of coverage you need — policies with higher limits cost more than those with lower limits. Raising or lowering your coverage deductibles can also affect your premium. Choosing a higher deductible means you pay less in premium; of course, you’ll pay more out of pocket if you file a claim. Choosing a lower deductible results in a higher premium.
Is condominium (HO-6) insurance required?
As with any homeowners scenario, your bank is likely to require you to carry condo (HO-6) insurance for as long as you have a mortgage — the bank may also have requirements for your dwelling limits. Even if your mortgage is paid off, you may still be required by your condo association to have coverage. Once again, check your condominium association bylaws for details.
Regardless of whether coverage is required, it’s a good idea to have a condominium (HO-6) policy if you own a condo. As with any home, a condo is a significant investment that you want to keep protected.
Figuring out how much condominium (HO-6) insurance you need
The amount of dwelling coverage you need is first going to depend on what your association’s policy does and doesn’t cover. If it’s an “all in” policy that covers your entire unit, then you may need very little dwelling coverage. If, however, you need to insure your unit “from the drywall in,” then you’re going to need more coverage.
If you do need to insure from the drywall in, one rule of thumb is to base your dwelling coverage limit on 20% of the appraised value of the condo. So if the condo is valued at $150,000, you’d want to purchase dwelling coverage with a limit of at least $30,000.
To figure out the amount of personal property coverage needed, do a home inventory: make a list of all your belongings — furniture, electronics, appliances, clothing, sports and hobby equipment — then do a little shopping to see how much it would cost to replace these items. The total dollar amount should be a good estimate of the limit you need.
Choosing an HO-6 insurance policy
Shopping for condominium insurance means considering many of the same things as you would if shopping for a standard homeowners policy, with some additional things to think about. The good news is that your condo association bylaws should provide guidance on what you need to cover. You can also lean on an insurance agent for advice or shop around for recommendations. If you own or are shopping for a condominium, you’ll want to be familiar with how this coverage works.