If you buy a condo, your mortgage lender will likely require you to purchase condo insurance to protect the investment. This may leave you wondering what condo insurance even is or if it’s any different from normal homeowners insurance.
While these two types of insurance policies have more similarities than differences — as both protect your home, personal belongings, and liability — you generally won’t need anywhere near as much insurance for your condo as you would if you owned a single-family home. Because of this and a few other differences, insurers usually sell HO-6 condo insurance to condo unit owners, and HO-3 or HO-5 homeowners insurance for single-family homeowners.
What’s the difference between condo and homeowners insurance?
The main difference between homeowners insurance and condo or co-op insurance is how much dwelling coverage you need to purchase to cover the structure of your property from accidental fires, windstorms, and other covered damages or losses.
When you own a house, you’re financially responsible forthe entire structure, which means your dwelling coverage should be high enough to replace everything from your roof to your foundation and siding to interior cabinetry, floors, and walls.
However, when you own a condo, you’re really only responsible for everything between the walls of your individual unit and nothing else.
The structure of the condo building — such as the roof, lobby, gym, and other common areas that you share with other residents — are covered under your condo association’s master policy. In most cases, master policy premiums are paid jointly by unit owners, and are typically rolled into monthly condo fee payments.
Condo insurance | Homeowners insurance | |
|---|---|---|
How dwelling coverage differs | Responsible for interior of condo unit | Responsible for entire structure of home |
How other structures coverage differs | Not included in condo insurance | Responsible for additional structures on your property |
How personal property coverage differs | Responsible for insuring personal belongings inside and outside of condo unit | Responsible for insuring personal belongings inside and outside of home |
How loss of use coverage differs | Coverage limit is 50% of Coverage C (personal property) limit | Coverage limit is 30% of Coverage A (dwelling coverage) limit |
What you're covered against | 16 named perils for both interior of condo and personal property | Open perils for home's structure, 16 named perils for personal property |
Average cost in 2023 | $506 per year | $1,754 per year |
Condo insurance (HO-6) and home insurance (HO-3) coverage differences, explained
Here’s a breakdown of the main differences between condo insurance and homeowners insurance.
Dwelling coverage
Your policy’s dwelling coverage limit should be based on the cost to rebuild your property from the ground up — also known as its replacement cost. A property’s square footage, number of rooms, and interior fixtures (cabinets, countertops, etc) all contribute to its replacement cost.
However, when you own a condo or co-op, your dwelling coverage limit should be based on what your condo association’s master policy does or doesn’t already cover.
To give you a better idea of how much dwelling coverage you need, you’ll need to figure out if the master policy provides structural coverage for interior units. And if it does, you’ll need to figure out what type of structural coverage it comes with, as this will impact how much of this coverage you need for your personal condo policy.
There are three main types of master policies: bare walls, single entity, and all-in coverage.
Bare walls coverage: Covers the condo building, common areas, and the associations’ liability in case of an injury in a building common area, but does not cover the interior of condo units. That means if your building policy has this coverage, you’ll need to purchase enough dwelling coverage to replace everything inside the four walls of your unit.
Single entity coverage: Covers the condo building, common areas, and the associations’ liability in case of an injury in a building common area, plus the interior of your condo, including your floors, walls, ceiling, bathroom fixtures, and kitchen cabinets. However, this coverage does not extend to unit alterations or improvements, so you’ll need enough dwelling coverage to pay for any changes you make to the condo.
All-in coverage: Covers the condo building, common areas, and the associations’ liability in case of an injury in a building common area, plus the entire interior of your condo and any alterations or improvements that you make to the unit. If your condominium association has this type of master policy, you likely won’t need to purchase any dwelling coverage for your personal condo policy.
Personal property coverage
Both homeowners and condo insurance protect your personal property from covered damages and theft. Regardless of how broad the coverage your condo association’s master policy is, it won’t cover personal belongings inside your unit.
Liability coverage
Liability coverage reimburses you for financial loss if you’re sued for bodily injury or property damage.
If you own a house, you’re generally exposed to more liability risk since you’re responsible for any accidental injuries that occur on your property. When you own a condo, you’re only responsible for accidents that occur in your individual condo unit.
For example, if a guest is injured in the condo building’s weight room or pool area, the financial responsibility falls on the condo association — not the unit owners.
Loss assessment coverage
This is a policy add-on that covers losses assessed to condo or homeowners association members after a damage or loss to a building common area.
Loss assessment coverage only takes effect if the cause of loss is covered by your personal condo policy. For example,if you’re issued a loss assessment for flood damage to the building lobby, you wouldn’t be covered for your portion of the loss since flooding isn’t a covered peril on condo insurance policies.
What is the cost of condo insurance compared to homeowners insurance?
The average cost of homeowners insurance is $1,754 per year, according to our analysis of 2023 home insurance rate data across the country.
Meanwhile, condo insurance costs around $506 per year on average, according to the National Association of Insurance Commissioners (NAIC). [1]
The cost of home and condo insurance is primarily based on the square footage, location, and build of your residence. Since homes are generally bigger and more prone to extensive structural damage compared to condominiums, homeowners insurance is almost always more expensive than condo insurance.
Frequently asked questions
Do most states require home or condo insurance?
Home or condo insurance is not required by law in any state, but most mortgage lenders will require this insurance when you take out a loan on the property.
What is special coverage A on a condo policy?
Special coverage A is an endorsement that can be added to your HO-6 policy to upgrade your condo insurance from named perils coverage (meaning you are only covered for damage caused by specific named perils) to open perils or all perils coverage, which covers everything except the causes of damage or loss that are listed as exclusions on the policy (meaning they’re not covered).
Which type of homeowners insurance is referred to as special coverage?
The most common type of homeowners insurance is an HO-3 policy, which is also known as special form homeowners insurance. HO-3 coverage offers all perils coverage, which means it covers anything that happens to your home except what is listed as an exclusion on your policy.
