Why Do Condo Owners Need Condo Insurance?
Plainly, the association’s master policy doesn’t cover a number of aspects of the interior of your unit. For example, let’s say there’s a fire at your complex. It destroys a number of your belongings, and you’re forced to move out for a few weeks while your unit is repaired.
- Your association’s master policy may cover things like fixing any structural damage to the building or repainting and repairing hallways damaged by smoke and water.
- However, the master policy won’t cover items such as 1) damage to your property or 2) the expenses involved with living elsewhere for a few weeks. Condo insurance, however, would likely cover you for those losses.
Additionally, you may simply be required to purchase condo insurance by:
- Your condo association – Many condo associations require their owners to purchase an HO-6 insurance policy. Your condo agreement will likely specify the minimum requirements for this coverage.
- Your lender – If you’re taking out a mortgage to pay for your condo, the lender will often require the borrower to purchase an HO-6 policy. They also may have specific requirements as to the coverage you choose.
Now, you have an overview of what condo insurance is, how it’s different from the condo master policy, and why you might need it. Next, let’s take a deeper dive into which policies cover what. It’s important to understand each type of coverage to prevent gaps that leave you unprotected in case of an incident.
Condo Master Policies: What Do They Cover?
Although you’ll have little control over the master policy your condo association purchases, it’s important to understand what it covers. That way, you’ll know exactly what kind of coverage you’ll need for your own condo insurance policy.
As we mentioned earlier, a master policy generally covers the structure of the building and the common areas, including things like:
- Exterior building damage,
- Damage to common areas like the pool, hallways, lobby, elevator, parking area, etc., and
- Liability for injuries in the common areas, such as if someone trips on a large crack in an exterior sidewalk that has sat unrepaired for several months.
However, the exact coverage will depend on the policy that your association has chosen. Condo master policies generally come in three different types:
Condo Insurance Policies: What Do They Cover?
Your condo’s master policy will cover the shared areas (as well as certain aspects of your unit, as we noted above). Your HO-6 policy will cover what’s inside your unit—as well as the things that happen inside your unit, too. Common coverage you’ll see in a condo insurance policy include:
Although these are the most common types of coverage included in a condo insurance policy, there are a few others you may want to ask about.
Additional Coverage to Consider
Depending on your circumstances—and your risk tolerance—you may also want to consider customizing your condo insurance policy with these additional coverages:
- Hurricane coverage: Although living in Hawaii isn’t quite the same as living in Hurricane Alley in the Caribbean, the state has had its share of big storms. Talk to your insurance agent to decide if this kind of coverage is right for you.
- Replacement cost coverage: In a standard insurance policy, damaged personal property is reimbursed at the “actual cash value,” which means you receive a depreciated value for older items. In other words, you’re not going to get the price you paid for that TV five years ago. You’re going to get its current value. If you choose replacement coverage, you’ll be reimbursed for the cost of replacing your damaged items with brand new ones.
- Scheduled personal property: This is a fancy term the insurance industry uses to describe coverage for expensive items. Personal property generally comes with a total limit for reimbursement, as well as an individual limit for certain types of items. In other words, you might have $50,000 of personal property coverage, but a you’re only covered for jewelry up to $2,000. If you have a $10,000 heirloom diamond necklace, you’d want to purchase coverage specifically for this piece. That falls under scheduled personal property. Bottom line: If you have some serious valuables, including jewelry and art, talk to your insurance agent about covering them specifically.
- Vacant condo coverage: If you’re planning on leaving your condo vacant for more than 30–60 days at a time, your policy may not cover your condo. If you’re planning on, say, spending the summer on the mainland, make sure you tell your insurance agent so you can be covered in this instance.
What’s the Best Way to Shop for Coverage?
You’ll find a number of providers for condo insurance in Hawaii, each of whom offer different coverage with different deductibles and limits. Before you buy coverage:
- Get three different quotes – Just as we recommend for vetting moving companies, we also recommend getting three different quotes before choosing one company. This will give you a good sense of the going rate for coverage in your area.
- Talk to an insurance agent – You’ll find plenty of online providers, but you might also find it helpful to talk through your options with a live person. Coverage can get complicated quickly, and insurance agents are often able to offer you simple, easy explanations. They can also help you customize your coverage to eliminate any potential gaps between your policy and the condo master policy.
- Check with your car insurance provider – Some insurers offer discounts when you bundle condo and car insurance.
- Don’t just look at cost alone – Not all coverage is created equal. Look at the deductible you’re being offered—i.e., what you have to pay before insurance kicks in. Additionally, look at your coverage limits, and make sure you understand what’s covered and what’s not before purchasing your policy.
The Coverage and Protection You Need
Purchasing a condo in Hawaii is a big step. As with all of your investments, it pays to protect it in case of the unexpected. By understanding your association’s master policy, as well as what kind of coverage you need, you’ll be able to purchase your condo insurance with confidence. Plus, knowing that you’re protected can offer you significant peace of mind when it comes to making your condo purchase.
Need some help moving into your condo in Hawaii? With teams and warehouses on all four major Hawaiian Islands, we’re ready (and happy!) to assist. Just reach out to us for a free quote to get started.