Most of the time, we think of insurance as something that protects us from the unknown: what if you get into a car accident, or your house burns down?
Did you know that your condo association has insurance coverage for those emergency situations? In many cases, that insurance coverage is just as comprehensive as what you would get from a standard policy. But that doesn’t mean that you’re automatically covered.
Are you fully covered? Let us help you figure that out.
At its most basic, condo insurance – also known as an HO-6 insurance policy – provides protection against damage to your condo and its contents caused by fire, smoke, theft, and vandalism. In fact, your lender will require it before approving your home loan.
Your condo insurance can even cover additional living expenses. Some of these expenses can include:
Your condo insurance policy (HO-6) is going to be very similar to a homeowners insurance policy (HO-3) but you won’t need both.
One difference with condo insurance is that you will also have some added coverage options. For instance, if you were to experience a flood, a separate policy might be needed to cover the damage from the water.
In the same vein, you may be able to buy additional coverage to cover your liability if someone were to get hurt on your property.
Your condominium building is probably covered under “master insurance policies” purchased by the condo association or homeowners association (HOA) unless stated otherwise by the bylaws.
You can think of condo association insurance as a policy that covers damages to the common areas of a building that is owned by a condo association.
This could include the roof, the exterior walls, the hallways, the elevators, the exterior doors, and the common areas.
It’s important to remember that this type of policy usually does not cover the units inside the building.
Here’s a more comprehensive list of what your condo association insurance could over:
Another way to determine what your specific condo association’s master insurance policy covers is to ask what kind of policy they have. There are 3 main types of condo master insurance policies:
Knowing what your condo association covers already can help you decide what type of condo insurance HO6 you need for your specific unit.
As a condo buyer, it’s important to consider how condo insurance can help protect your home and your loved ones.
Condo Owner Insurance HO6 Covers:
What Condo Owner Insurance Does NOT Cover
The types of condo insurance you need to be aware of are your own condo owner insurance HO6 policy and the master insurance policy that your condominium association pays for.
Remember: If you own a condo, you would NOT need a homeowners insurance policy HO3.
This is because, as a condo owner, you’re usually only responsible for the interior of your unit and your personal property – not the exterior.
You would be responsible for choosing and paying for your condo insurance HO6 policy. The condo association will pay for the master policy that covers the exterior building as well as shared spaces.
Just like with homeowners insurance HO3, condo insurance HO6 is usually required by your mortgage lenders so that their financial interest is protected for your loan period.
“Is condo insurance still required even if I paid off my mortgage?”
Oftentimes, yes. Even if you’ve paid off your mortgage and purchased your property from the beginning, many homeowners associations (HOAs) require it.
To determine how much condo insurance HO6 you need, you need to know how much the condo is worth.
You can use an appraisal service or a condo insurance coverage calculator to determine how much your condo is worth.
According to the 2018 National Association of Insurance Commissioners data, the national average condo insurance cost is $506 per year.
In Illinois, the average cost of condo owner insurance is about $398.
Your insurance policy rate could vary widely depending on your condo’s location, condo association rules, the value of your personal belongings, and the deductible you choose. Because of this, it is sometimes best to use a condo insurance coverage calculator.
The best way to save money on condo insurance rates is to shop around at least 3 different condo insurance companies for the coverage you want.
This is so that you can get a better understanding of the condo policies and coverage limits each insurance company provides before making the best decision for yourself.
There might even be discounts available if you bundle different types of insurance with the same company. For example, bundling a condo owner insurance policy and auto insurance policy from a single insurance company or insurance agent.
Another way to save money is to get an insurance policy with a higher deductible. If you go with this option, you should make sure that you have enough savings to pay that higher deductible amount if a disaster or emergency occurs.
If you own a condominium in a common interest development, you may have heard that your condominium association has an insurance policy.
But are you fully covered? In short, yes. But the condo association is usually only responsible for the exterior and shared areas of their properties. You would be responsible for the interior and liability coverages of your own unit.
We all know that buying a condo is not an easy task. Not only do you have to come up with a large sum of money, but you also have to deal with all the paperwork.
The entire process is not only time-consuming but also confusing.
At A and N Mortgage, we have a team of experts whose job is to make sure that your loan is processed as quickly as possible. By having our own underwriting department, we are able to settle on the loan amount, interest rate, and the terms of your loan quicker and without any trouble.
If you need help with your home buying experience, we are here to help! Contact us today.
A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.
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