What is condo insurance and what does it cover?

What is condo (HO-6) insurance?

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

Condo insurance financially protects you, the property owner. HOA insurance, on the other hand, covers things you and other condo owners in your building may use but aren’t financially on the hook for. These typically include shared spaces like lobbies, swimming pools and other building amenities. While you don’t need to worry about buying HOA insurance, you should get familiar with what it covers. Depending on what kind of master policy your building has, some of that coverage could extend to your unit.

What does condo insurance cover?

HO-6 policies are structured similarly to homeowners insurance policies. But, how you’re protected is slightly different. With an HO-3 (the most common home insurance policy type), the home’s physical structure is covered under the dwelling portion of the policy for all types of losses except those specifically excluded.

With HO-6 condo insurance, you still have dwelling insurance. But, with condo dwelling coverage, you’re only covered for your interior walls and floors. The exterior walls, roof and foundation of your building would be covered by the building’s master policy. The physical structure of your condo’s interior is usually protected on a named peril basis, meaning you’re only covered for losses listed in your policy. These losses usually include:

• Fire
• Lightning
• Explosion 
• Wind 
• Smoke 
• Falling objects 
• Accidental water discharge 
• Vandalism and malicious mischief 
• Theft 
• Burglary damage 

Condo insurance is structured to include these coverage types:

It is 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, such as:

• 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.

• 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. This includes 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.
• 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.
• 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.

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 potentially 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.

As mentioned, 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 consider credit history when calculating premiums, but among those that do, individuals with better credit may earn lower rates. Improving your credit can take time, but it 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: A deductible is the amount you’re responsible for paying out of pocket in the event of a covered claim. Insurance is designed to cover the rest up to your policy limits. If you agree to a higher deductible, it's likely that your condo insurance premium will be less. Just be sure you don't choose a deductible you would have trouble paying.

How to file a condo insurance claim 

Filing a condo insurance claim isn’t all that different from a home insurance claim. Condo insurance claims usually involve one extra step: notifying your HOA. Some or all of the claimable damage may be covered by your building’s master policy. Here’s the process, step by step: 

1. Document the damage: Take enough photos and videos to give a clear picture of exactly what happened. 
2. File a police report (if necessary): For theft claims, you’ll likely need to file a police report as part of the insurance claims process. In some states, you may be able to do so online. 
3. Contact your HOA: It’s possible that a claim affected more than just your unit, like if a tree fell onto the side of the building or water leaked in from the roof into your unit. Before you file a claim with your condo insurance company, reach out to your HOA to see if any part of the damage falls under the master policy. It’s possible that the damage affected your unit, but you’re not financially responsible for it. 
4. Follow your insurance company’s claim process: If it’s determined you — and not your HOA — are responsible for filing the claim, you’ll need to follow your insurer’s instructions on how to file a claim. It’s possible your insurance company will send an adjuster to your condo to further assess the damage. 
5. Check your policy for your duties after loss: To avoid your claim getting denied, check your policy to see what you, as the policyholder, are responsible for doing after damage. For example, if a window breaks, you may need to cover it with a tarp or board it up to prevent further damage to your unit. If you go out and buy any materials to do this, you’ll likely be reimbursed by your insurance company for those costs in your claim.

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