3 Facts Regarding Condominium Insurance

Many people purchasing their first place neglect to factor in the cost of condominium insurance to monthly cost estimates. Whenever you own a property, the cost to insure the property will greatly increase your expenses. Understanding broad concepts about how your property will be insured is important.

#1 - Condominium insurance is a legal requirement

All 50 states mandate the use of condominium insurance for any person who owns a condo. The same is true of home insurance for home owners. This mandate comes from the state insurance boards; it is not a federal requirement. The reason for the requirement stretches back to the roots of the insurance industry itself. Insurance was originally created as a way for communities to split the cost of unforeseen expenses due to group risks. The first insurance companies were actually fire companies. They responded to calls for firefighters, and the community as a whole paid them to put out the blaze. As they evolved, these companies began providing assistance for other risks as well. Many of the largest insurance companies around today had their humble beginnings as fire response teams. The concept of a community splittlng insurance costs is still alive as well.

#2 - Condominium insurance is evaluated in the same ways as home insurance

When you are purchasing a condo, be sure to look into condo insurance information instead of just home insurance information. On the whole, the way the costs of both options is evaluated is the same, but the factors will be different. For example, both home insurance and condo insurance consider security risks to a property to determine the cost of theft coverage. With a home, though, these risks are considered on an individual basis. With a condo, the security features of your entire complex will need to be evaluated. Where your unit is located in the building will have an impact. Similarly, the maintenance record of your building as a whole will impact your individual property protection costs.

#3 - Your home owners' association may determine set insurance standards

It is rare to locate a condominium without an attachment to a home owners' association (HOA). These associations manage the grounds of the building, repair joint property and make other key decisions. Even small complexes with 2 or 3 condominiums usually form an HOA for joint expenses and concerns. Since the HOA will be impacted when there is an insurance claim in the building, the organization may have requirements for your individual coverage. For example, the HOA may state you must use an A rated company for your insurance. The HOA may also mandate you carry a certain value in liability limits in case you cause damage to another unit. In the most extreme cases, the HOA will tell you exactly which company you have to use in order to reside in the building. Before you sign any contract with an insurance company for condo insurance, ensure you meet requirements set in your community to prevent possible penalties.