How Much Insurance Do I Need?

J.T. from Windham County, Connecticut writes:

Dear Mister Condo,

A big chunk of my monthly common fees is used for insurance for my condo. I was recently told that this insurance doesn’t cover my personal belongings and that I need to buy more insurance. Insurance is not cheap and I don’t understand why the condominium insurance doesn’t cover my belongings. Why do I need to spend more money on insurance?

Mister Condo replies:

J.T., I hope you never need to make an insurance claim of any type. However, insurance plays an important role in protecting the association as well as the individual condo owners. Here’s a quick primer on what’s covered and why.

Condominiums are required by their own documents and by law to insure most common elements of a common interest community like your condo. There are many reasons for this but quite simply if something were to happen to the buildings or other common elements that define the value of the community, the insurance assures investors and owners that the real property will remain intact or be rebuilt. You will routinely here this type of coverage referred to as the Master Policy. Additionally, it is fairly typical for condominiums to also insure against flood, accident liability, and even worker’s compensation. All of these insurances benefit all unit owners and are considered in common so they are included as a portion of your annual budget and billed to you monthly as part of your common fees. For many communities, insurance is the largest line item in their budget so a great deal of time and effort is generally spent in reviewing coverage and selecting a provider.

Individual units are another story. Generally speaking, the condominium association is not responsible for what goes on inside your unit from an insurance standpoint. Again, there are many reasons for this but suffice it to say that if you wish to insure your personal belongings you will need to do so with your own insurance policy. This is such an important issue that some condos have actually mandated that individual unit owners purchase their own insurance policy. In our state, that policy is routinely called an HO-6, and it is very similar to the insurance a renter might purchase to protect their items. This policy will cover everything from your IPad to your clothing. You may not be mandated to purchase it where you live but I can tell you from experience, it is a great idea.

I have always said that the best type of insurance is the one that you never have to make a claim against. It provides peace of mind even if no loss is ever suffered. My advice is to shop around for your HO-6 insurance. If you already have other insurance like car or life, check to see if your insurer offers a discount for adding the new insurance. I wish you all the best in your insurance quest and I hope you never need it for more than your own peace of mind.