What she didn't plan on was a pipe bursting in an upper-level exterior wall while she was away on a business trip. She thought her foresight in getting condo insurance would protect her, but she didn't anticipate what would happen if there was a leak from an exterior wall. That is when she learned the harsh truth about the difference between condo and homeowners insurance.
If you're a condo owner, it's important to know these differences from the start:
Whether you own a condo or a house, a homeowner's insurance policy has six separate sections of coverage:
1. The Primary Dwelling
2. Other Structures (not attached to primary structure)
3. Personal Property (belongings inside the dwelling)
4. Loss of Use (if the dwelling is uninhabitable due to damage)
5. Personal Liability (if your negligence caused injury to a person or his property while on your property)
6. Medical Payments to Others (covers medical expenses if someone is injured on your property)
When you get a mortgage for your condo or house, the lender requires that insurance be held on the property to protect the bank's interests should the property come in "peril," which can include damage from theft, fire, wind, hail, hurricanes or other occurrences. Separate policies would need to be secured if your home is at risk for flooding or earthquake. In either instance, policies should provide replacement costs and not original costs.
Now for the key differences between condo and homeowners insurance, which are in the first three sections of coverage:
Condominium Insurance Policies
Condominiums must be insured for both the structure and the contents:
1. The Primary Dwelling -- Insurance for the structure of the dwelling is held by the homeowners' association.
2. Other Structures -- This is not usually applicable for condominium-style dwellings.
- Personal property insurance for the contents of the dwelling is held by the homeowner.
- Your condominium covenants define the parameters of what their policy will cover, but typical coverage includes everything from the wall studs and out.
- Your condo insurance will cover from wherever the parameters leave off, typically everything inside from the wall studs.
- If your condo building burned down, the homeowners' association policy would be responsible for rebuilding the structure, while your personal property insurance would cover everything else.
- For this reason, condo dwellers should declare a higher personal property amount because that is the category under which replacing cabinets and appliances would fall. In a single-family-dwelling insurance policy, that would be covered under section 1: The Primary Dwelling.
4. Loss of Use -- Applies to both condo and single family dwellings.
5. Personal Liability -- Applies to both condo- and single-family dwellings.
6. Medical Payments to Others -- Applies to both condo and single-family dwellings
Homeowners Insurance Policies
For single-family dwellings, insurance policies have the same six sections, but the values are distributed differently:
1. The Primary Dwelling -- Covers the entire structure, and all construction materials associated with it. Kitchen cabinets, built-in bookcases, all permanent elements are covered under this section of the policy, unlike in condos.
2. Other Structures -- Covers sheds, detached garages, well houses, etc., valued at 10 percent of the main structure or less. If that is insufficient, additional coverage can be purchased.
3. Personal Property -- Covers the personal belongings of the residents valued at 50 percent of the main structure. If that is insufficient, additional coverage can be purchased for a nominal cost per $1,000 of value.
4. Loss of Use -- Applies to both single family dwellings and condos.
5. Personal -- Applies to both single family dwellings and condos.
6. Medical Payments to Others -- Applies to both single-family dwellings and condos.
Once Patty regained her composure after seeing the mess that greeted her, she contacted her insurance company to file a claim. That is when the reality of condo vs. homeowners insurance reared its ugly head. She was anxious to have repairs done to return her townhouse to its previous glory, but since the damage was caused by a pipe in the outer wall, her insurance company wanted the damage to be covered by the homeowners' association. The HOA's administrator was slow to contact its insurance company, which in turn led to delays in getting an adjuster out to see the damage, which in turn delayed Patty in making the required repairs.
There's no doubt that there are perks to living in a condo -- for instance, the maintenance of the lawn and your building's exterior are covered by the dues paid to your HOA. But in an insurance claim like Patty's, in which a broken pipe was at fault, the reimbursement process might have been simpler, quicker and much less stressful if she owned a single-family dwelling.
Barbara Green is the Design Diva and owner of Sensibly Chic Interior Design. Follow her on Twitter @thedesigndiva.
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