Why Do I Need to Buy Condo Insurance?
First Time Condo Buyer: Why do I need to buy condo insurance? The HOA fee states that it includes insurance?
Well, this is an excellent, and often-asked question.
Yes, it's true, the HOA does has an insurance policy that is paid by the residents as part of their HOA fees. However, this policy, usually referred to as a master policy, is limited in scope and in general covers things like the common areas and buildings (policies can vary and this should be verified to determine what they actually cover).
There are 2 very good reasons why you should purchase a condo insurance policy.
#1 - Unless you are purchasing the condo with cash, your lender will likely require it, paid for 1 year in full at or before the time of closing. No choice here as far as I have seen, and some lenders are very particular about what policy you must have vis-à-vis the master policy, since that policy can vary. But even if not required it is a prudent thing to do.
#2 - The Master Insurance Policy will not likely cover any loss of your personal goods, damage to the interior of your home including cabinetry, appliances and the floor, and perhaps even the walls. Do not make assumptions but verify what the policy DOES cover and have your insurance agent provide you with the coverage needed.
Your condo insurance may cover a number of things - your possessions for one. And you want coverage for the interior that is not covered in the HOA's Master Insurance Plan.
But you may have options for other coverage such as personal liability in the event you get sued (due to injury to others or property damage), and temporary living expenses if you have to be out of your home due to damage that is being cover. Check with you insurance provider in advance to find out your options and costs.
Certainly one other important reason to check into insurance is to make sure there are no issues with the condo that might limit what coverage you can get, e.g., excessive claims. A C.L.U.E. report (Comprehensive Loss Underwriting Exchange) is a smart thing to obtain in the course of your due diligence in any home purchase. Be aware that not all insurance providers participate in providing data about loss history to the C.L.U.E. database.
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