Understanding Condo Insurance

Why condo insurance?

Maybe you just purchased a newer condo in Reed’s Crossing Hillsboro? Or an older one like in the Murrayhill Woods in Beaverton? Wherever it is, condo insurance exists to help you recover from certain accidental losses to your condo, your property, and your person.

(As always, if you want nitty-gritty details about your specific condo policy, you’ll need to consult your actual insurance policy as they can vary in significant ways. Your agent should be able to help you.)

How is condo insurance different than regular home insurance?

Condo policies are often more complicated than regular home policies.

For regular home policies, you mostly need to find accurate information about your home and personal property to find a decent policy. But for condo policies, you should usually do a bit more homework.

While home policies typically aim to insure your home for an amount that could reasonably be expected to reconstruct your home, condo policies typically aim to insure your dwelling for the amount that is your responsibility.

One reason condo policies are trickier is that they are part of an association that provides some level of insurance for the condo. (But what is that level?)

Another is that a condo-association has bi-laws that outline, or should outline, what is and isn’t your responsibility. These bi-laws can vary widely!

Some bi-laws make the entire condo your responsibility, and other bi-laws make the entire condo the responsibility of the association. Most end up somewhere between.

Another is that condos are typically connected to other units physically. While regular home policies are typically single-family dwellings set apart by space, a condo may have other units alongside, below, behind, and above (!).

These differences make condo policies and condo claims some of the trickiest out there for personal insurance.

Although a good real estate agent and a good insurance agent should help you understand these things, it’s important to remember that the basic responsibility to figure it out is yours.

Three Steps for Getting a Good Condo Policy

You don’t want to wait for a kitchen fire to find out how your condo is covered!

That’s why it is important to find out what you’re responsible to insure and confirm what coverage the association actually has. That’ll enable you to request intelligent quotes that will provide sensible coverage for your situation.

1. Review the bi-laws.

It’s not exciting, but the bi-laws should state what part of the property you’re responsible to insure. It should also clarify what part is the association’s responsibility. It really is a spectrum.

Some bi-laws make the owner responsible to insure the entire property, interior and exterior (in which case you may want a regular home policy).

Some bi-laws make the owner responsible for insuring “walls-in,” including interior fixtures, flooring, and improvements.

Finally, some bi-laws give minimal responsibility to the owner, leaving the condo owner responsible only to insure their personal property and liability. In this case, an association has (or should have!) an extensive “master policy” that insures all the building property within the association.

It’s important to remember that while bi-laws outline who is responsible, the bi-laws do not actually insure the condo. That’s why a second good step is to understand the association’s master policy.

2. Review the association’s “Master Policy” and see what the association policy actually covers.

The association should be able to provide a Certificate of Insurance, and good insurance providers will supply an information sheet to guide you as to what is and isn’t covered.

You’ll want to pay attention to what is covered, the amount of coverage, and the association deductible. Typically, you’ll want your condo policy coverage to at least meet the association policy deductible.

If you feel stuck, don’t be afraid to give the insurance company or your agent a call. Ask them to help you understand what might make a good match with the master policy.

3. Get quotes from a few different places.

We’re happy to help here.

What does a condo policy cover?

In exchange for payment an insurance company agrees to help protect you financially from events that might accidentally happen to your condo, your possessions, or to you.

Although companies have added many optional coverages over the years (see below), an insurance company typically agrees to help cover repairing or replacing your condo structure and possessions after losses caused by certain perils such as fire, wind, or vandalism. 

If the damage makes your condo unlivable, the company also agrees to help cover costs to put you up elsewhere. Finally, it also offers some liability protection for claims against you that might arise from your property or personal activities.

In this part of Oregon and Washington, some of the more common condo claims are fires, theft, or damage from a sudden water pipe leak.

Property Coverages

Building Coverage (your home)

Let’s start with the easy part. Your condo insurance policy covers your dwelling structure from certain sudden and accidental losses caused by perils such as a fire, windstorm, hail, vandalism, a burst pipe, or something falling on it, like a tree.

Earthquake and flood damage are not typically covered in a basic policy but can be added either to an existing policy or as a standalone policy.

Condo policies can flex this coverage quite a bit so that’s why it is important to get a handle on what you are responsible to insure (see Three Steps above).

Other Structures (your separate structures)

If you have a significant separate structure that you own as a part of your condo, be sure to ask your agent for clarification on where it is covered.

Personal Property (your stuff)

A condo policy also typically covers your stuff, everything from your spatulas and blender to your clothes, furniture, electronics, jewelry, and tools.

It’s important to know that certain categories of personal property do have “special limits.” So if you have high value items, be sure to ask your agent or insurance company about the limits.

Loss of Use or Additional Living Expenses

A condo policy also pays for the increased cost of living if your home becomes unlivable due to a covered loss. For example, if a fire destroys your condo, your policy will pay to put you up elsewhere in the meanwhile. This coverage will also cover the added cost of meals.

Liability Coverage

Your condo policy will also defend you from claims where someone sues you claiming that you or your property caused them some physical harm. For instance, if someone trips down your deck stairs or if your dog bites them and causes medical injuries.

This coverage typically ranges from $100,000 to $1,000,000 and is relatively inexpensive.

Medical Payments

Your condo policy may contain some coverage for an accidental injury to an invited guest. This coverage typically ranges from $1,000 to $10,000.

Loss Assessment

If there’s a significant covered loss to the association’s common property, say the clubhouse burns down, the association may assess all the unit-owners to help cover the damages. That’s what this coverage is for.

This typically ranges from $10,000 to $50,000 and will frequently be listed at an amount that at least matches the association’s insurance policy deductible.

More Common Optional Add-ons (or Endorsements)

Earthquake Coverage

Some carriers offer to add this coverage directly to your condo policy. Just like it sounds, this option means that your policy will cover damage to your property in the event of significant damage by an earthquake. (I say “significant” because the earthquake option has its own deductible that is quite high when compared to the usual condo policy deductible, say 15% or 20%).

Go here for our more full explanation of earthquake insurance.

Special Personal Property

“Help I lost my expensive ring!” This coverage broadens the coverage on your personal property. Home policies commonly cover losses due to theft, but adding this coverage would extend coverage even in the case of misplacement or an item being lost.

Water Backup Coverage

Basic condo policies do not cover damages caused by water backing up through drains into the house. This option adds some amount of coverage for those damages, typically $5-15,000 of coverage.

Short-Term Rental

Basic condo policies don’t anticipate that you’ll be renting your home out on a short-term basis, which introduces new risks to your property and liability, but then along came AirBnB. This option provides some coverage for that type of situation.

Personal Injury

While the regular condo policy provides liability protection in the event of physical harm (for example your dog bites someone), this coverage defends you in claims of reputational harm in the event of a libel or slander lawsuit.

Identity Fraud

If your identity is stolen, this coverage typically reimburses you for expenses associated with getting your identity stolen. Additionally, this coverage typically includes access to a team of experts who specialize in restoring people’s identities.

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