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A condo unit is often the purchase for many first-time home buyers.  Purchasing a home can be such an exciting time, but we all know how overwhelming the financial aspect of it can truly be. Even when it comes to the insurance side of things.  It’s always a great idea to understand the key differences between condo and home insurance before purchasing your first property.

Condo insurance is also known as your HO6 insurance policy.  The biggest misconception about condo insurance is that it provides the same coverage as your standard HO3 Homeowners Policy.  This is not necessarily true.  It provides most of the same coverages, but is varies greatly when it comes to the dwelling.  We will get into that in a bit.  A HO6 policy is geared for individuals who own a condo/townhouse and use it as their primary residence.  However, it can also be used for condos that are used as seasonal or sometimes even rented out.  A HO3 policy, on the other hand, is structured for individuals who own a single family home (or townhouse) which is used as their primary or secondary residence.  There are some exceptions to this as well.  A small handful of carriers will write a HO3 for homes that are rented out.

First let’s talk a little about a HO3 policy so we can then compare a HO6 to it.  A HO3 (Homeowners Policy – Form 3) covers your Dwelling, Other Structures (detached garage, pool, fence, etc.), Contents, Loss of Use, Liability, and Medical.  It covers you for perils such as fire, wind/hail, lighting, water (not flood), vandalism, theft, and more. 

The biggest thing to keep in mind when it comes to a HO6 (Homeowners Policy – Form 6) is the dwelling.  The way it covers Contents, Loss of Use, Liability, and Medical is very similar to a HO3.  To purchase a HO6 policy, the condo HOA must have a master policy that insures the building.  Because there is a master policy (which you help pay for in monthly/quarterly dues) you only need coverage for the interior part of the dwelling.  Unlike a HO3, which covers the entire dwelling and other structures on the property.  Now there are many ways the HOA bi-lays can be written in regards to what the HOA will cover and what the unit owner is responsible to cover.  There are two ways that are most commonly used, however.  So the HOA by-lays could read that the unit owner should purchase coverage (are responsible for) for “Walls In” or “Alterations and Additions”.  Walls In coverage basically means the unit owner is responsible for the sheetrock and everything else inside the dwelling.  This could be cabinets, fixtures, flooring, appliances, etc.  Or with Alterations and Additions wording, the unit owner basically is only responsible for any upgrades or changes to the unit from how it was originally built.  For example:  if the unit owner replaces carpet with hardwood floors they would be responsible for that.  Keep in mind that though those are the most common ways you find HOA by-laws written, there are an infinite ways that can be written.  So it is best to fully read the HOA documents and by-laws to understand what you need coverage for in a HO6. 

Just a side note - mortgage companies almost always require a HO6 policy to meet their loan guidelines.  The amount of coverage required may vary by how the master policy and by-laws are written and vary by what type of loan it is.  You may want to purchase more coverage than just the minimum that the lender requires.   

One more thing we would like to touch on when it comes to a condo policy is the Loss Assessment coverage.  A HO6 policy should come with $1000 limit of this coverage with higher limits available at a reasonable premium.  Condo associations can assess each unit owner if there is a large loss to multiple units.  Again, it is best to review the HOA by-laws to see how this could apply and in what cases it could apply.  Loss Assessment coverage provided in a HO6 can help with this type of expense.

Just like about any other policy, you are able to add on additional endorsements to your policy such as Water Back-Up coverage and Personal Injury Liability coverage.  As you can see a HO6 policy helps protect you from a wide variety of risks as a condo unit owner.  Davis & Massey understands how important it is for you to receive the right coverages at the right price.  If you or anybody else is looking for excellent coverage and rates on a Condo Insurance Policy (HO6) please don’t hesitate to give us a call at Davis & Massey Insurance Agency for a quick and easy quote.   



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