How much condo insurance do you need in 2022? Here is a detailed guide to help you find the right amount of coverage for your condo unit.
You saved, searched and now you have got the condo you dreamt of. Whether it’s on a gorgeous beach, in beautiful mountains, or in a booming city, having your own condo gives you an excellent feeling. But it’s also important to protect your dream home from any type of damage whether it’s natural or man-made.
This is where condo insurance comes in to save your precious investment.
A condo insurance policy is specially designed to protect condos from various types of damages but it can be difficult to find the right amount of condo insurance you need for your condo.
If you are also struggling with how much condo insurance do you need, here are all the details to help you decide the right amount of coverage.
What Is Condo Insurance?
Condo insurance is a policy that protects your personal items if they get stolen or damaged. It also protects your condo unit and pays for the damages if disaster strikes.
It also provides you liability protection in case someone gets injured on your property and sues you for causing injury.
However, people often get confused that their homeowners’ association policy (HOA policy) protects their condo unit and personal belongings.
Sorry to say but your homeowners’ association policy only covers the building and the common areas. It does not cover your individual condo unit. For that, you need to purchase a personal condo insurance policy.
What Your Homeowners Association Insurance Policy Covers?
To know the answer to this question, ask your homeowners association for a copy of their insurance declaration page. It will give you a clear idea of the coverage offered under your HOA policy so that you can purchase your condo insurance accordingly to fill the gaps.
- Bare Walls Coverage – This coverage protects the exterior structure of your condo building. It also covers the common areas of your condo building. If your HOA has this coverage, you will be responsible to cover the interior of your condo unit.
- Single entity coverage – Often referred to as ‘walls-in‘ or ‘studs-in,’ single entity coverage also covers systems (such as cabinets) that are outside a condo unit‘s walls.
- All-in coverage – This covers the whole interior of your condo unit. If your HOA has this coverage, you don’t need to purchase your own dwelling coverage.
How Much Condo Insurance Do You Exactly Need?
Here is all you need to know to find the right condo insurance coverage for yourself.
Dwelling coverage refers to the amount you will be paid to repair or rebuild your condo if it gets damaged due to covered peril like fire.
To get an idea of the correct amount of coverage, you need to research the construction cost in your area. This is the best possible way to determine your coverage need.
If you don’t own your condo, then talk to your mortgage lender if there is a requirement for dwelling coverage.
If it’s needed, then ask how much coverage is needed. For example, if your condo is valued at $1 million and your lender requires dwelling coverage equal to 25% of the condo’s value, you will need coverage of a minimum of $250,000.
Always try to get dwelling coverage enough to cover the full rebuilding cost of your condo. Otherwise, you may face big losses as construction costs keep skyrocketing.
Do a regular check year after year to make sure your coverage is still enough.
Personal Property Coverage
This coverage pays for the replacement of your personal items like furniture and appliances if they get stolen or damaged.
To get the right amount of coverage, do an inventory of all the items you have and calculate the worth of every item.
If you have expensive belongings like art or jewelry, then increase your coverage limit to fully protect your precious possessions.
You will also need to choose if you need actual cash value or replacement cost value.
Actual cash value means you will get an amount equal to the current value of the item that gets damaged or stolen. This means that if you bought a TV for $800 some years ago and its current value is $200, you will get only $200 if it gets damaged.
Whereas replacement cost value means you will be replaced with a brand new TV if it gets damaged or stolen.
Liability coverage protects you from an expensive lawsuit and also helps in paying the settlements and medical fees if any accident happens in your property and you are found liable.
Suppose if a person visits you and gets injured in your property or your dog becomes aggressive and bites someone and that person decides to sue you, then this coverage comes to your rescue and helps in paying the legal fees or medical expenses.
The minimum cost of liability insurance is $100,000. It may or may not be enough based on your circumstances.
If you get caught in an expensive lawsuit, this amount may not be enough and you may need greater coverage to bear the legal cost.
You should also keep in mind your assets that need proper protection and should decide if your preferable coverage limit is enough to protect all your precious belongings.
Additional Living Expenses Coverage
Additional Living Expenses or ALE refers to the coverage that pays for the cost of living outside your condo, i.e hotels, and restaurants if your condo is being repaired.
The cost of living in a hotel or restaurant adds up pretty quickly. So you should make sure that you have enough ALE coverage for your needs.
Loss Assessment Coverage
Loss assessment comes into effect when your homeowners’ association (HOA) policy hits the coverage limit.
This coverage helps in paying your share over and above your coverage limit if your condo building gets destroyed due to any disaster.
Condo insurance is essential if you consider the level of financial protection it provides. Your condo is one of the biggest investments of your life and you won’t like to take a chance when it comes to securing your precious property.
We hope this guide helped you to make a better decision regarding the amount of coverage you need to make sure your condo unit and your personal belongings are covered.