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Marc A. Hebert's Money Sense: Get help when insuring your condo -- it's complicated

May 04. 2018 10:37PM
Condo insurance is complicated. We suggest that you consult a property and casualty agent who is familiar with condo policies to review the details and help ensure you have the coverage you need. (Metro Creative Connection)

Condos can be a great choice for buyers wanting a low-maintenance home. In addition to lower upkeep expenses, there are some other factors that make owning a condo different, including insurance.

The insurance difference is because you don't own the entire property. You will end up owning the unit itself and what's called an "interest" in the "common" areas of the condominium project. The condo association has one insurance policy (called the master policy) and you will have another.

The condo association's monthly dues can include the cost of insurance for the building's exteriors and common areas. Common areas are shared with others including hallways, elevators, and lobbies, for example. The master policy should also offer liability protection for incidents that happen in the common area.

The only way to be certain is to check the master policy and condominium association bylaws. Review this with your insurance agent. If you don't feel that your policy is adequate, discuss the deficiencies with the association.

There are two basic types of coverage that a master policy may provide:

Bare walls in: This type typically covers the real property from the exterior framing inward, essentially an empty shell. You would be responsible for insuring the interior walls, flooring, plumbing, etc.

All in: This type can protect many of the interior elements. It may cover basic fixtures and additions to the interior surfaces of your walls, floors and ceilings.

Take the time to familiarize yourself with the master policy. Your own coverage should be for the items not included under it.

It could be helpful to see how much other owners in the development paid for recent upgrades such as new flooring, cabinetry and countertops. It is important to obtain a rough estimate on replacement costs if you need to cover these under your own policy.

Content is another area in which to seek coverage. Inventory what you have, including electronics, furniture, rugs, etc. Artwork, jewelry and antiques might need special riders. Your personal condo policy might also cover private entranceways or garages that you are responsible for. Again, check the condo agreement. If a guest gets hurt in your condo, the proper insurance can help cover medical bills and liability costs if you are sued.

You will need to review the types of perils that are covered by your individual policy. These could include things like fire, lightning, explosions, smoke, vandalism and theft. The perils in your individual coverage might not be inclusive of everything you would like to have covered. You might be able to purchase additional coverage against other dangers such as earthquakes, flooding and water backup.

One area to pay particular attention to is titled loss assessment. You can collect up to a certain amount for a loss assessment charge. Loss assessments typically result from losses suffered by the condominium as a whole. An example is damage to a roof that is not covered by the master policy or is subject to a large deductible. These uninsured damages are then passed through to all unit owners.

Your policy will specify the amounts that you can recover in the event of a loss. Your policy might pay the total replacement cost of your property or you might receive only the actual cash value. Actual cash value payments include an element for depreciation. Certain items may be assigned a specific dollar value no matter what the age or condition. Coverage limits will be described in your policy.

Condo insurance is complicated. We suggest that you consult a property and casualty agent who is familiar with condo policies to review the details and help ensure you have the coverage you need.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at Your question and his response might appear in a future column.

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