Navigating Condo Insurance Changes: A Guide To Protecting Your Home

Condo insurance can be confusing, with condominium owners often protected under two insurance policies: a master policy for the condo association and an individual, or HO-6, policy. Changing your condo insurance is a relatively simple process, but it's important to do your research and understand your association's master policy to avoid gaps in coverage. You can switch your insurance provider at any time, but you may incur a penalty or fee if your policy hasn't expired. It's recommended to review your current policy, consider your coverage needs, research different insurance companies, and then start your new policy before cancelling your old one.

Understanding the two types of condo insurance policies

Condo insurance can be confusing, as condominium ownership is a form of ownership, not a type of residence. This means that the insurance program is made up of different pieces that need to be put together like a puzzle.

There are two types of condo insurance policies: one for individual condo owners and another for the condo owners' association, also known as the master policy.

Individual Condo Insurance

Individual condo insurance policies help protect your personal unit and your belongings. This type of insurance covers repairs to your home and your belongings if they are stolen or damaged. It also includes liability coverage in case your dog bites someone or a guest gets hurt.

Condo Association Insurance

The condo association insurance policy, also known as the master policy, typically covers the building, including the roof and siding, and common or shared areas such as hallways and pools. In some cases, the master policy may also extend to the interior of the unit, covering standard fixtures, bare walls, floors, and ceilings within each condo unit.

It is important to understand the type of master policy your condominium association has and what is covered under that policy. You can then make an informed decision about what additional coverage you may need for your individual condo insurance policy.

Knowing when to change your insurance provider

Firstly, if your insurance rates have increased at renewal, it is a good time to shop around and compare quotes from other providers. You can also do this if you are moving to a new house, as your insurance needs may have changed. For example, if you are downsizing to a condo, your insurance needs will be different, and another provider may better suit your requirements.

You may also want to change your insurance provider if you are unhappy with the level of customer service you are receiving, or if you have had a bad claims experience. It is also worth switching providers if you can get a better deal or more comprehensive coverage elsewhere. For instance, you may want to bundle your home and auto policies, and not all insurers will offer this.

Finally, if you have made home improvements or renovations, your coverage needs may have changed, and it may be a good time to review your options.

Researching different insurance companies

When researching different insurance companies, it's important to keep in mind that condominium insurance is often misunderstood. Owners are typically protected under two insurance policies: a master policy for the condo association and an individual, or HO-6, policy. The master policy is held by the condo association and covers the exterior of the building, common areas, and the outside/physical structure of your condo.

The individual, or HO-6, policy covers damage to the unit itself, damage to the contents of the unit (your personal property), and damage or injuries you cause to others in connection with your residence (your personal liability).

When researching different insurance companies, it's important to compare rates and coverage options. Here are some factors to consider:

• Coverage Limits: Compare the types of coverage offered by each insurer, including policy limits and exclusions, as well as additional perks such as wildfire mitigation services or cash-out settlements.
• Deductibles: Ensure you are making an accurate comparison by considering the different types of deductibles the policy comes with (such as separate wildfire, hurricane, or windstorm deductibles) and ensuring they are the same amount.
• Customer Service: Look beyond price and consider the insurance carrier's reputation and customer service availability. Check customer satisfaction and claims satisfaction studies, such as J.D. Power's, to assess how well each company fares in these areas.
• Financial Strength and Stability: Assess the financial strength and stability of the insurance company by referring to scores from agencies such as A.M. Best. This will give you confidence in their ability to pay out claims should disaster strike.

Additionally, you may want to consider the following:

• Safety Features: Installing protective devices and safety features in your condo, such as deadbolt locks, burglar alarms, fire alarms, or a monitored security system, can often qualify you for discounts on your insurance premium.
• Location: The location of your condo can significantly influence the cost of insurance coverage. Condos in areas prone to natural disasters or with higher crime rates often have higher insurance premiums.
• Personal Belongings: If you have valuable items such as expensive jewelry, furs, silverware, or artwork, ensure that the insurance policy provides sufficient coverage for these items. You may need to purchase additional protection or an insurance rider to cover their full value.

Coordinating coverage with your condo association

Understanding the Basics

Firstly, it's important to recognize that as a condo owner, you have dual ownership. You own a single-family unit that is your home, and you also share ownership of "limited common elements" with other residents. These common elements typically include areas such as the building's exterior, swimming pool, elevator, courtyard, and gym. Understanding this distinction is essential when coordinating coverage with your condo association.

Master Policy vs. Individual Policy

Typically, condo owners are protected by two insurance policies. The first is the master policy, also known as the condo association's insurance policy. This policy is purchased by the condo association management and covers the common areas and shared amenities within the building or complex. The second policy is the individual condo owner's policy, often referred to as an HO-6 policy, which covers the interior of the unit, personal property, and personal liability.

Understanding the Master Policy

The master policy, or the condo association's insurance, typically covers the structure of the building and common areas. However, it's important to note that the extent of coverage can vary. In some cases, the master policy may include ""bare walls coverage," which only covers the basic building structure, such as walls, floors, and elevators. In other cases, the master policy may include "original specs coverage" or "single-entity coverage," which covers both communal structures and individual units, including basic interior elements like flooring and cabinets. The most comprehensive option is "all-in coverage," which covers the entire building, including improvements made to individual units over the years.

To understand what your condo association's master policy covers, carefully review the association's declarations, bylaws, or CC&Rs (Covenants, Conditions, and Restrictions). These documents will outline who is responsible for what and the specific details of the master policy's coverage. Understanding these documents is crucial to determining your individual insurance needs and coordinating coverage effectively.

Coordinating Coverage

Now, let's delve into how to coordinate coverage between your individual policy and the condo association's master policy:

• Know Your Association's Master Policy: As mentioned earlier, understanding what the master policy covers is essential. Review the association's declarations, bylaws, or CC&Rs to determine the scope of their coverage.
• Identify Gaps and Overlaps: Once you know what the master policy covers, identify any gaps or overlaps with your individual policy. For example, if the master policy includes "single-entity coverage," you may need to insure any improvements or upgrades you've made to your unit.
• Communication is Key: Don't hesitate to contact your condo association directly if you have questions or require clarification. They can provide valuable insights and help you understand their insurance coverage and how it coordinates with your individual policy.
• Consider Additional Coverages: Depending on your specific situation, you may want to consider additional coverages, such as loss assessment coverage, betterments and improvements coverage, or liability insurance for personal liability claims within your unit.
• Work with an Experienced Agent: Consider working with an independent insurance agent who understands the intricacies of condo insurance and can help you navigate the process. They can assist in reviewing policies, identifying gaps, and ensuring you have the necessary coverage in place.

Remember, coordinating coverage between your individual policy and the condo association's master policy is crucial to ensuring you have comprehensive protection for your condo unit and shared spaces. Take the time to understand the specifics of both policies and don't hesitate to seek expert guidance when needed.

Cancelling your old policy and switching to a new one

Cancelling your old condo insurance policy and switching to a new one is a relatively straightforward process. Here are the steps you can follow:

• Review your current policy: Before making any changes, it's essential to understand your current coverage, limits, deductibles, and other benefits. Check your existing policy's terms and conditions, including any early termination fees or specific effective dates.
• Evaluate your coverage needs: Consider your current insurance requirements, especially if they have changed since you signed up for your last policy. Think about any upgrades or improvements you've made to your condo, as these may impact the type and amount of coverage you need.
• Research and compare different insurance companies: Explore the market and compare quotes from multiple insurers. Ensure you're getting comparable coverage, limits, and deductibles when reviewing different options. Consider factors such as the company's reputation, customer service, financial stability, and the discounts they offer.
• Purchase your new policy: Once you've found a suitable policy that meets your needs and preferences, go ahead and buy it. Remember to choose a new policy before cancelling your current one to avoid a lapse in coverage.
• Cancel your old policy: After your new policy is in place, contact your previous insurer to cancel your old policy. Ensure that the cancellation date is on or after the effective date of your new policy. Confirm the cancellation and find out if you're entitled to any refunds or if there are any early cancellation fees.
• Inform your lender or mortgage company: If you have a mortgage or an escrow account, notify your lender about the switch. Provide them with the necessary details of your new policy, including the insurance company's name and address. This step helps ensure that your insurance payments are directed to the correct insurer.

Frequently asked questions