Real Estate — Condominium Law
Many condo owners assume their building’s master insurance policy covers everything. It doesn’t. Understanding exactly where the association’s coverage ends and your personal policy must begin can save you from a devastating financial loss.
The Two Layers of Condo Insurance
Condo insurance involves two distinct layers. The association’s master policy covers the building, common areas, and sometimes original fixtures inside units. Your personal HO-6 policy covers your individual unit, belongings, liability, and anything the master policy doesn’t.
What Does the Master Policy Cover?
The association’s master policy typically covers:
- The building’s structure — roof, exterior walls, foundation
- Common areas — hallways, lobbies, elevators, amenities
- Building liability for injuries in common areas
But the scope of coverage inside individual units varies significantly depending on the type of master policy your association carries.
Types of Master Policies
Bare Walls Coverage
The most basic type. Covers only the bare structure of the building — walls, floors, and ceilings in their original unfinished state. Everything inside your unit — flooring, cabinets, fixtures, appliances, and all improvements — is your responsibility to insure.
Single Entity Coverage
Covers the original fixtures and finishes installed by the developer — standard flooring, cabinets, and built-ins as originally constructed. Any upgrades or improvements you made after purchase are not covered and must be insured by your personal policy.
All-In Coverage
The most comprehensive type. Covers all fixtures and improvements within the unit — including upgrades made by previous or current owners. This significantly reduces what your personal policy needs to cover, but it is less common.
What Does Your HO-6 Policy Cover?
A personal condo insurance policy (HO-6) typically covers:
- Your personal property — furniture, electronics, clothing, and other belongings
- Interior improvements — flooring, cabinets, fixtures you are responsible for
- Personal liability — if someone is injured inside your unit
- Loss of use — living expenses if your unit becomes uninhabitable
- Loss assessment coverage — your share of a claim that exceeds the master policy’s limits
Loss Assessment Coverage — Don’t Skip This
Loss assessment coverage is one of the most important and underappreciated parts of an HO-6 policy. If a claim against the association exceeds the master policy’s limits — say, a major injury in the lobby — the association can assess each unit owner for their share of the shortfall. Loss assessment coverage pays that bill up to your policy limit. It is inexpensive to add and can save you thousands.
How Much Coverage Do You Need?
Start by getting a copy of the association’s master policy and finding out what type it is — bare walls, single entity, or all-in. Then calculate the cost to replace your personal property and any improvements you are responsible for. Your liability coverage should be sufficient to protect your assets — most experts recommend at least $100,000 to $300,000.
Key Takeaways
- The association’s master policy covers the building — your HO-6 covers your unit and belongings
- Know what type of master policy your association carries — bare walls, single entity, or all-in
- Your HO-6 must cover the gap between what the master policy covers and what you own
- Always include loss assessment coverage in your HO-6 policy
- Review both policies annually and after any major renovations to your unit
Disclaimer: The information on LegalConsultants.com is provided for general informational purposes only and does not constitute legal advice. Always consult a qualified attorney for advice specific to your situation.