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The Difference Between Homeowners and Condo Insurance (Difference between HO-3 and HO-6)

When purchasing a home, it is important to understand the difference in insurance policies as it pertains to the type of property being considered.  Homeowner’s Insurance policies for single family homes vary compared to condominiums/townhomes insurance policies. The differences between a homeowners insurance policy (HO-3) and a condo/townhome/co-op insurance policy (HO-6) are minor and are mainly in the Dwelling Limit, Other Structures, and the Loss Assessment coverages.

Coverage A – Dwelling Limit

A homeowners insurance policy includes coverage of physical damage to not only the interior of the house but also the exterior. A condo insurance policy protects only the interior of the condo unit, including walls, floors, and ceilings.

For a condo, the homeowner’s association will typically purchase a master condo policy that protects the exterior of the building and that is paid for through the common charges each unit pays (usually on a monthly basis). Therefore, it is important to confirm the homeowners insurance monthly dues cover the master policy for the structure (all HOA’s are required to have such coverage).  The dwelling limit (coverage A) for a homeowners policy is the value of the house minus an estimated value for land and location. The dwelling limit for a condo policy is much less and is typically estimated based on the value of any upgrades made to the unit. Don’t rely on the condo association’s bylaws. If you’ve invested in a new kitchen or bath, you could be underinsured. Contact your insurance agent and have a thorough conversation regarding your personal belongings inside your unit to make sure you have or obtain the proper coverage.

Coverage B – Other Structures

The main difference between a homeowners insurance policy and a condo policy is that a homeowners insurance policy covers “Other Structures,” such as fences, detached garages, mailboxes, and so on, and a condo insurance policy does not. Your condo (HO-6) policy only covers the interior of your unit.

Coverage D – Loss Assessment

A condo policy includes loss assessment coverage, which is not included in a homeowners policy. The coverage protects the unit owner in the event the association must assess all unit owners for uncovered costs as a result of a covered claim.

This situation could occur if, for example, a person was seriously injured and the judgment awarded was higher than the amount of insurance currently in force by the master condo policy. Another example would be if damage occurred to the common areas of the condo complex that was higher than the amount of insurance. In such a case, all unit owners could potentially be assessed to cover the costs.

Finally, the biggest difference between the two policies is the premium. A condo policy could be as low as a third of the premium of a homeowners insurance policy, depending on the size and value of the property. Talk to your insurance agent for more details.

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