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Homeowners Insurance for a Condo or Co-op

Once you’ve found the perfect apartment, it’s important to get property insurance.

In fact, most co-ops, condos and mortgage lenders require proof of insurance before they’ll sign off on your purchase.

Two separate policies

You’ll want to ensure you’re getting the best coverage at the best price, but you must also determine what’s covered by your building’s policy and what’s not. The Insurance Information Institute advises that condo and co-op owners need two separate policies to protect their investment:

  • Your own insurance policy. This provides coverage for your personal possessions, structural improvements to your apartment and additional living expenses if you are the victim of fire, theft or other disaster listed in your policy. Most insurers refer to this coverage as a “condo unit owner’s policy.”
  • The “master policy” provided by the condo or co-op board. This covers the common areas you share with others in your building like the roof, basement, elevator, boiler and walkways for both liability and physical damage.

“As a new property owner, it can all be a little confusing,” said State Farm agent Glisel Jimenez based in Summit, N.J. “We encourage brand-new property owners to get a copy of their building bylaws and bring them in so we can help them determine what their building’s policy covers and what sort of coverage it requires unit owners to have.”

Some building bylaws, for instance, make co-op and condo owners responsible for everything from the “studs in” while others include builder’s upgrades.

Check to see if you need liability insurance

In addition to determining your property insurance needs, the bylaws will tell you whether your building requires a minimum level of liability insurance. Liability insurance provides coverage for damage caused by you to another unit (perhaps your overflowing bathtub leaked into the apartment below you) and for injuries sustained inside your apartment (a delivery person trips over a bag on your hallway floor and breaks his leg.)

Even if it’s not required, Jimenez said it’s a good idea for condo and co-op owners to have some.

“When you’re living in such close proximity to other people, it’s more likely your action could adversely affect them,” she said. “Having liability coverage is great protection that doesn’t cost a lot.”

Consider loss assessment insurance

Loss assessment coverage is another low-cost insurance add-on that Jimenez recommends for condo and co-op owners. It’s protection you can use on claims involving the building or its common areas. Most buildings have insurance that covers incidents outside of your personal unit, however these claims can easily exceed the master policy limits.

If, for example, a storm causes $600,000 damage to the exterior of the building and the master policy has a $500,000 property damage limit, unit owners likely will be assessed for the remaining $100,000. If you’re in a 25-unit building, that’s $4,000 you need to come up with. In most cases, loss assessment coverage will cover that cost for you.

“Insurance can be complicated and new property owners are often rushed and stressed, trying to figure out what they need to get to be able to close the deal,” said Jimenez. “I tell people, get the policy you need to meet the building’s or bank’s requirements and then come back in a month, when you’re moved in and the boxes are unpacked, and we’ll figure out if you’ve really got the coverage you need.”

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