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Are you currently shopping the real estate market for a condo? If you are, keep in mind that most mortgage lenders require proof of condo unit insurance before they approve a purchase. Also, make sure you understand the insurance requirements and coverage options for the unit you intend to purchase.
Generally, a condo association insures the building and common elements under a single policy, called the master policy. This policy typically provides one of three kinds of coverage:
1. The basic building (walls, roof, floors, elevators), but not unit items (such as appliances, carpeting, cabinets, wall coverings) and in some cases not interior walls
2. The basic building and unit items, but not unit additions, alterations, or improvements made by you at your expense
3. The basic building and unit items, including additions, alterations, and improvements
When a master policy is in place, you will need to purchase an individual policy to cover the items and changes in your unit not covered by the association master policy. You may also want to consider coverage for damage to your unit not compensated because of the master policy deductible.
Keep in mind that unit owner insurance responsibilities can vary widely. For example, some associations may have no master policy, which shifts the responsibility for insuring the structure to the unit owners. Review your building’s insurance documents and bylaws with a qualified agent early in the purchasing process to make sure you comply with all requirements and purchase adequate coverage for your home.
A typical condo unit policy also includes coverage for several other common items and situations:
Personal Property: In most cases, condo unit owners are responsible for insuring their possessions against theft, damage, or loss. Personal property coverage insures your clothes, furniture, electronic equipment, and other household items for their replacement value or their actual cash value (original price minus depreciation). Your property is usually covered whether it is in the unit or you have it with you when you are away from home.
Loss Of Use: This coverage applies if you temporarily have to live elsewhere because your condo was made uninhabitable by a fire or other covered peril. The policy will reimburse you for the portion of hotel bills, meals, laundry, and other living expenses that exceed what you would pay if you were living in your home.
Personal Liability: Liability coverage protects you if others make a claim or bring suit against you for physical injuries for which you are responsible. It also provides protection if you or a family member causes damage to others’ property. Some policies will pay for defense and court costs, in addition to settlement costs.
As always, you should check with a well-qualified agent if you have questions about your policy or a policy you are purchasing.