Buying a Condo or Townhome? Ask These Insurance Questions Before You Commit
Buying a condo or townhome is a little different from buying a single-family home, especially when it comes to insurance.
You may have two insurance policies protecting different pieces of the same property: the HOA's master policy and your individual HO-6 policy. The important question is where one policy stops and the other begins.
Before choosing an insurance policy, I encourage my condo and townhome buyers to gather the HOA insurance documents and ask a licensed insurance professional some very specific questions.
Want the questions handy while you talk with your insurance professional?
Download or save my 17-question checklist.
What Does the HOA Master Insurance Policy Actually Cover?
Start with the HOA master policy. Depending on the HOA and its insurance policy, coverage may be described as bare walls, walls-in, single entity or all-in.
That distinction can affect which parts of the unit, fixtures and improvements you're responsible for insuring yourself.
Instead of simply asking an insurance provider for "an HO-6 quote," bring the HOA documents with you. Ask the insurance professional to explain how the proposed policy works with this particular HOA's master policy.
Colorado Buyers: Pay Attention to Hail Deductibles
Colorado weather makes the HOA deductible an especially important part of the insurance conversation.
Ask about the master policy deductibles for wind, hail, wildfire, water and other covered losses. Find out whether any are percentage-based, and whether the policy has annual aggregate limits, special wind or hail limits, or restrictions involving multiple similar claims during the same policy period.
A QUESTION WORTH ASKING IN COLORADO
What happens if there are two hailstorms?
Ask your insurance professional: “How would this policy respond to two separate hailstorms and two assessments in the same policy year?”
Ask for the answer based on the proposed HO-6 policy and this specific HOA master policy.
What Is Loss-Assessment Coverage?
This is one of the insurance conversations I especially want condo and townhome buyers to have.
An HOA may assess individual owners for costs associated with a covered loss. Ask your insurance professional how much loss-assessment coverage the proposed HO-6 provides and whether the limit applies per occurrence or per policy period.
Then get more specific: Does it cover your share of the HOA master-policy deductible? Is there a separate or smaller sublimit? What happens if the master insurer denies, limits or exhausts coverage?
Even timing can matter. Ask whether coverage depends on the date of the loss, the date the assessment is made, or both.
HOW MUCH?
What is my loss-assessment coverage limit?
WHAT DOES IT COVER?
Can it cover my share of the HOA master-policy deductible?
WHEN DOES IT APPLY?
Does the date of loss, assessment date, or both determine coverage?
What Does Your HO-6 Actually Cover?
Some of the most useful insurance conversations involve coverage that may not automatically be part of the basic quote. Ask your insurance professional whether any of these are available or appropriate for the property you're considering.
Water & sewer backup Ask about backup and sump-overflow limits and deductibles.
Ordinance or law What happens if covered repairs must meet newer building codes?
Additional living expenses How much coverage is included, and is there a time limit?
Valuable property Do jewelry, art, collectibles, business equipment or other valuables need separate scheduled coverage?
Other property-specific coverage Ask whether flood, earthquake, service-line or equipment-breakdown coverage is available or appropriate.
Bring the HOA Documents to Your Insurance Professional
A generic answer about HO-6 insurance isn't necessarily an answer about the policy you're considering.
Bring the HOA master-policy declarations, deductible schedule and governing documents to your insurance professional. Ask them to evaluate the proposed HO-6 coverage alongside this specific HOA's master policy.
When a limit, exclusion or endorsement could materially affect you, ask for the answer in writing.
BEFORE YOU COMMIT
Ask for the answers in writing.
Coverage ultimately depends on the actual policy, endorsements, HOA documents, facts of a loss and the insurer's claim decision.
That's supported by the note at the bottom of your checklist.
Condo & Townhome Insurance Questions Buyers Often Ask
Does the HOA master policy cover the inside of my condo?
It depends on the HOA's governing documents and master insurance policy. Ask whether the master policy is written on a bare-walls, walls-in, single-entity or all-in basis, and have your insurance professional identify which unit components and improvements you're responsible for insuring.
Can an HO-6 policy cover an HOA insurance deductible assessment?
Some HO-6 policies include loss-assessment coverage that may apply in certain circumstances. Ask specifically whether the proposed policy can cover your share of an HOA master-policy deductible, what limits or sublimits apply, and what exclusions could affect coverage.
What happens if an HOA has two hail claims in one year?
That depends on the master policy, your individual policy, applicable limits and deductibles, and the circumstances of each loss. Ask both about restrictions on multiple similar claims under the master policy and how your HO-6 would respond to two separate assessments.
What documents should I bring when getting an HO-6 quote?
Start with the HOA master-policy declarations, deductible schedule and governing documents. Your insurance professional may request additional information based on the property and proposed coverage.
You Don't Need to Be an Insurance Expert.
You Need to Know What to Ask.
Condo and townhome insurance can involve more moving pieces than buyers expect. The goal isn't to become an expert in insurance language. It's to make sure the right professional has the right documents and you're asking useful questions before you commit.
That's why I created my 17-Question Condo & Townhome Insurance Checklist. Save it to your phone or bring it with you when you talk with your insurance professional.
If you're considering a condo or townhome in Colorado Springs, Monument, Palmer Lake or elsewhere in the Pikes Peak region, I'm happy to help you work through the real estate side of the purchase and connect you with insurance professionals when you need one.
A helpful note from Carmen: I'm a real estate broker, not a licensed insurance agent. I'm happy to connect you with insurance professionals and help identify useful questions to ask. Please rely on your insurance professional to explain policy language, recommend coverage and confirm how a proposed policy may respond. Coverage depends on the actual policy, endorsements, HOA documents, facts of the loss and the insurer's claim decision. Please obtain your own written coverage confirmation.
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