Insurance Condo Cost
Jordon Scrinko
Published by Jordon Scrinko
Last Updated On: May 10, 2024

How Much Dwelling Coverage Do I Need for a Condo? – Here Are the Facts

As someone who has navigated the process of purchasing a condo many times, I understand the importance of securing the right insurance coverage for your new home. It’s not just about meeting the requirements; it’s about ensuring comprehensive protection that safeguards your investment and provides peace of mind.

Amidst the array of insurance policies available, dwelling coverage stands out as a cornerstone of condo insurance. However, deciphering the intricacies of this coverage and determining the appropriate amount can be daunting for new condo owners.

In this article, we’ll delve into the nuances of dwelling coverage, offering insights and guidance to help you make informed decisions about your condo insurance needs.

Stay tuned as we unravel the complexities of dwelling coverage and empower you to make confident choices when it comes to insuring your condo.

What Do You Mean by Dwelling Coverage?

protected home

Dwelling coverage refers to the type of condo insurance policy that is responsible for protecting everything associated with the condo where you live or have ownership. This includes pets, clothing, appliances, furniture, any other liability, etc.

The dwelling coverage that you need for your condo will depend upon the master policy of different projects. However, for a basic idea, it would be safe to say that everything in the condo that you own is protected by this condo insurance policy.

This coverage protects against HVAC issues, fires, explosions, etc. However, incidents like earthquakes, floods, and other such natural calamities are usually not a part of it.

Price of dwelling coverage

The pricing for dwelling coverage will vary in different cases. One common thing in all would be that the mortgage lenders ask for a part of this dwelling coverage to protect themselves when it comes to finances. The reason behind this is quite simple. In case you fail to pay for the damages, it is a loss situation for the mortgage lender. Therefore, they would need some security or protection for themselves [1].

There are a few mortgage lenders who ask the condo owners to buy 20 percent of the condo’s appraised value. For instance, if your condo’s cost is $800,000, then you would be asked to cover $160,000 as a part of your dwelling coverage. On the other hand, there are a few who base up the requirements per square foot instead. This pricing is usually around $100 per square foot.

Here’s how it will work

In case the repairs for the condo damages cost more than the dwelling coverage that you have, you will have to cover the remaining amount. For instance, the repairs cost approximately $150,000. However, the insurance that has ownership provides coverage for $100,000. In this case, the condo insurance firm will cover up for only $100,000 out of it. The remaining amount of $50,000 will be for you to cover, and the firm will have no obligation regarding anything in this.

Looking Into the Insurance Terms of the Condo Building

agreement

The dwelling coverage that you get for your condo also depends on the master policy of the building. The master policy insurance of the building is the coverage that’s used against the repairs for damages associated with other parts of the project. This would include areas other than your condo or apartment, such as amenity space, elevators, lobbies, etc.

How much dwelling coverage do you need? Three main types of condo insurance dwelling coverage are available:

1) All-in (everything inclusive) type

This type provides protection for the condo’s interior as well as exterior surfaces. This means that all the installations, fixtures, additions, etc. are covered. Also, you, as a condo owner, still hold responsibility for your personal property as it affects your privacy. There are different costs in case you wish to opt for liability coverage insurance too.

Liability insurance in terms of condo insurance means protection against accidents or any injuries that occur within the property. This type provides the maximum possible protection in case of damages.

2) Special entity type

This condo dwelling coverage type covers the majority of the condo structures. It is inclusive of all the fixtures in the condo. However, unit additions or structural changes are not a part of this type of coverage condo insurance.

3) Bare walls in type

This dwelling insurance is the least protective of all three. It includes only the bare structure of the condo. This means that you are responsible for ensuring all your other belongings like the interiors of the condo. For instance, the property coverage for bathroom, kitchen appliances, and other personal liability and property is upon you.

Knowing about these three master policies can help you make the right choice while choosing the ideal dwelling coverage plan for yourself.

What Protection Do You Get When You Opt for Different Policies for Dwelling Coverage?

The types of hazards that you get protection for vary according to the location of your condo, as well as the type of insurance coverage or liability claim that you have chosen for insurance.

HO-2 policy

An HO-2 policy is also commonly referred to as a named peril policy. This implies that your condo gets protection only for the perils that are specifically listed in the policy. Usually, there are 16 perils on the list.

The HO-2 policy type is not so popular anymore. This is because, under most circumstances, condo owners require and claim better coverage than the perils specified on the list.

HO-3 policy

An HO-3 policy is the most common and widely bought type of dwelling coverage. It is also referred to as an ‘open-peril’ type or ‘all-risk’ type of insurance. As all these names suggest, this type of dwelling coverage covers the condo against all the possible perils, except the ones that are spelled out in the policy. HO-3 is a broader type and accepts a better claim.

What Does a Typical Dwelling Insurance Cover?

Here’s what a typical dwelling coverage protects against:

  • Hail or windstormsthief
  • Fire
  • Theft or vandalism of any kind
  • Weight of ice/ snow
  • Damage caused by airplane or car
  • Falling trees
  • Sudden water damage
  • Tornadoes
  • Lightning

And here are a few things that are not usually covered by your insurance:

  • Floods
  • Earthquakes
  • Pests
  • Wear and tear due to neglect
  • War
  • Slow water damage
  • Mudslides
  • Sinkholes
  • Government action

How Much Dwelling Coverage Should I Opt For?

counting money

Your condo’s dwelling coverage depends upon the amount it would cost to make the repairs for any property damage. This means that you need to take into consideration the full rebuild cost along with the labor prices. Most of the dwelling policies are of the Replacement Cost Value (RCV) type.

This means that your coverage limit is the exact replacement amount you are entitled to, without any depreciation. For additional clauses, including liability insurance or other such covers, look into the specifics with care.

Therefore, make sure you check the declaration page of your condo insurance properly to know the proper reimbursement procedures [2].

The right insurance company will guide you through and provide you with the best and ideal dwelling coverage that you should sign up for as a condo owner.

To get a rough estimation, here’s what you should do to anticipate the dwelling coverage:

  • Find out the average pricing per square foot that is charged by home builders in a usual scenario.
  • Next, multiply the area in the square footage of your condo unit with this average cost.
  • Calculate approximate prices for appliances, flooring of the condo, fixtures, roof, windows, cabinetry, etc.
  • Add all the costs together to get an approximation of the dwelling coverage you should opt for.

Final Thoughts

As a condo owner, you need to personally look into all the possible factors associated with your condo before finalizing the dwelling coverage for it. It is a crucial decision to make, and hence, you need to be wise while making it.

Check out different available policies that are most suited to your area, and then narrow down your options after extensive research. Also, make sure you consult an expert before making the final purchase.

Still confused? Contact the team at Precondo and we’ll be happy to help.


References:

  1. https://www.allstate.com/tr/home-insurance/dwelling-insurance.aspx
  2. https://www.thebalance.com/loss-assessment-explained-for-condo-insurance-4060435

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