What is condo (HO-6) insurance?

What is condo insurance?

Condo insurance, also called an HO-6 policy, may help cover repair costs and financial losses arising from covered damages to the condo or claims against the condo owner. Condo insurance works in conjunction with a policy purchased by the condominium complex’s management, typically called HOA insurance or a master policy.

Several types of HOA insurance policies provide different levels of protection for unit owners. Since HOA policies generally only cover the complex’s common elements or shared structures, you will likely want to purchase an HO-6 policy to provide coverage for your specific condo and the personal belongings within it.

What does condo insurance cover?

HO-6 policies generally cover the same types of perils as homeowners insurance policies do for single-family homes, such as fire, explosions and theft. Typically, condo insurance policies include the following coverage types:

• Dwelling coverage: Dwelling insurance for condos is a central element with HO-6 insurance. It covers damages to the part of the building that you own: the interior surfaces, such as the walls between rooms and flooring. Unlike home insurance, however, it probably won't cover shared structural elements such as the foundation or roof. Those areas will generally be covered by the HOA's insurance.
• Personal liability coverage: This part of your policy will help cover the costs if you are sued over anything that happens in your condo. That may include legal fees, injuries and more. For example, if a visitor trips over a rug in your unit and breaks a leg, this coverage may help pay medical costs.
• Personal property coverage: Personal property coverage, as the name suggests, helps pay if your personal property is damaged or destroyed in a covered peril, up to your policy's limits. This generally includes all the contents of your condo, from furniture and appliances to clothing and electronics.
• Guest medical payments coverage: This provides additional financial assistance if a guest is injured in your unit but it is determined that you are not liable for the injury.
• Loss of use coverage: If your condo is so badly damaged after a covered claim that you cannot live in it until it is repaired, this policy element will pay for your living expenses until you can move back home. It generally covers hotel and meal costs, but may also include other costs such as pet boarding. It normally will not pay for your regular expenses, however, just anything over and above what you normally spend for living expenses.

It is likely important to know whether your policy covers the actual cash value or replacement cost of the items damaged by a covered peril. Replacement cost coverage offers broader financial protection as it pays the entire amount necessary to replace items. On the other hand, actual cash value only pays the depreciated value since the original purchase. Replacement cost coverage may be included in your policy already or available as an endorsement from your carrier.

What does condo insurance not cover?

While most condo insurance policies include the coverage listed above, there are typically specific exclusions from the standard coverage. Although separate policies and riders can often be purchased to offer the necessary coverage, standard condo insurance policies typically exclude:

• Damage from earthquakes and flooding
• Outdated systems or equipment that need to be brought up to code
• Damage from leaks or sewer backup

To provide additional financial protection, you may want to consider these add-on coverage options:

• Unit assessment coverage: If the HOA charges an additional assessment to condo owners to pay for a covered loss, this add-on may cover a condo owner’s share of the assessment.
• Umbrella policy: This is a separate policy that increases your overall limit of liability protection.
• Scheduled personal property: Personal property coverage may have limited coverage for high-value items. This is additional coverage for itemized expensive items such as jewelry, furs, art, fine wine or collectibles. This is often referred to as a “floater.”

HOA insurance vs. condo insurance

HOA insurance usually includes two coverage types: liability and property. The property coverage component covers shared common areas from covered perils. The liability coverage of a master policy may help pay medical costs and legal expenses if someone sustains an injury in a common area, like a clubhouse, lobby or swimming pool, but does not cover injuries sustained by guests within the walls of your condominium.

Condo management can typically choose between three types of property coverage. The type of property coverage your HOA has may impact how much condo insurance you need.

• All-in: This is the most comprehensive option for coverage. Following an approved claim, it typically pays for any damage to your unit's structural elements as well as any improvements you have made to the property. If you've installed pricey hardwood flooring, for example, you may be covered for its replacement.
• Walls-in: This type of policy is also referred to as single entity coverage. It provides a medium level of coverage somewhere between all-in and bare walls insurance. It should cover your unit's structure and systems, as well as installations such as built-in bookcases or kitchen cabinets.
• Bare walls: The most minimal of the three types of dwelling coverage for your condo, this insurance covers only the bare structure of the condo building, including the fixtures and furnishings of common areas as well as infrastructure such as plumbing and HVAC systems. It does not cover the interior of your condo unit, or anything in it.

Before purchasing an HO-6 condo policy, it may help to know how much coverage the HOA policy already provides. If your complex carries an all-in policy, you may not need to carry much dwelling coverage. However, HOA policy exclusions are also important. For example, a master policy may cover the interior structure of your condo but exclude non-standard fixtures that you add, like expensive imported tile or a custom stained-glass window.

Do I need condo insurance?

Anyone who owns a condominium or townhouse may want to consider purchasing a condo policy, and if you have a mortgage on the property, the lender usually requires it. Most standard condo policies include $100,000 to $300,000 in personal liability, which you can usually increase to fit your needs. If you think you need more liability protection than a standard policy can provide, you could consider purchasing an umbrella policy, which kicks in after you reach the liability limit of your condo insurance policy.

Most insurance companies will help you determine the dwelling coverage amount you need based on the square footage of the condo and finishes to rooms like the kitchen and bathrooms. If you want to get a ballpark idea about the coverage level you need, research the cost of construction in your area to calculate roughly how much it would cost to completely rebuild your condo, including materials, fixtures and labor. Condo owners covered by an all-in master policy may only need enough dwelling coverage to pay for losses the HOA policy excludes.

The replacement cost of your personal items should typically be considered as well. Standard policies usually provide actual cash value personal property coverage, which only pays the depreciated value for your belongings. But most condo insurance carriers also offer optional replacement cost coverage, which could replace your belongings at current market prices.

The best condo insurance

Finding the best condo insurance company usually involves understanding your needs and comparing quotes. Bankrate looked at factors like coverage offerings, discounts, availability and third-party scores from companies like J.D. Power and AM Best to find the best condo insurance companies. Keep in mind, though, that your own needs are unique to your situation, so the best condo company for you may differ.

How much does condo insurance cost?

Although costs vary significantly according to state and local factors, the average annual cost of condo insurance in the United States in 2023 was $531, according to the National Association of Insurance Commissioners.

Condo insurance providers set rates based on several factors, including:

• Age and type of construction
• Coverage types and amounts
• Deductible level
• Location
• Policyholder’s claims history
• Policyholder’s credit history (in most states)
• Policyholder’s marital status (in most states)
• Proximity to a fire station and fire hydrant

Other factors, like whether you have a pool or certain dog breed, may also increase your rates due to higher liability risks. Insurers usually charge higher rates for condos located in areas prone to natural disasters such as hurricanes and wildfires.

How can I save on condo insurance?

Requesting and comparing quotes may help you narrow down your list of cheap condo insurance providers. From there, the following strategies may help you save even more on your premium:

• Consider bundling: Many insurers offer a discount if you purchase more than one policy from them — most often, home or condo plus auto. This is called bundling, and may save you up to 20 percent or more, depending on your insurer.
• Make use of all discounts: Just about all carriers offer at least a few discounts that can save you money, and they may be easy to qualify for. In addition to bundling, you may earn a discount if you have fire, smoke or burglar alarms, install a new roof or go claims-free for a certain number of years.
• Improve your credit rating: Not all states allow insurers to take credit history into consideration when assigning premium rates, but in those that do, individuals with a higher credit score may earn lower rates. Improving your credit rating can take time, but may be worth working on if you want to save money on your policy.
• Make home improvements: Adding safety features, such a fire alarm or burglary deterrents, may earn you savings. If you live in an area where storms are frequent, installing storm-resistant shutters and garage doors may also help lower your rate.
• Increase your deductible: The deductible is what you pay before insurance kicks in after a claim. If you are able to pay a higher deductible, it's likely that your rate will decrease. Just be sure you don't raise it higher than you would be comfortable paying in the event of a claim.

HO-6 vs. HO-3 policies

The key difference between HO-3 and HO-6 policies is that HO-3 policies cover single-family homes and HO-6 policies cover condominiums. As such, an HO-3 policy covers damage to the entire home, including internal and external structures of the home, as well as personal belongings and owner liability.

An HO-6 policy typically includes many of the same coverage types, but covers just the interior structure of the condo. The exterior elements of the building, like the roof, are usually covered by the HOA master policy.

Frequently asked questions