Buying a condo is exciting, but figuring out dwelling coverage can be overwhelming. The right condo insurance protects your investment, meets lender requirements, and gives you peace of mind.
This guide simplifies the process, so you know exactly how much coverage you need without getting lost in technical jargon.
Quick Summary
- Dwelling coverage is a type of condo insurance that protects everything associated with your condo, including personal property like pets, clothing, appliances, and furniture.
- The cost of dwelling coverage varies. Mortgage lenders often require coverage to protect their financial interests.
- Some lenders might ask for coverage amounting to 20% of the condo’s appraised value, while others base requirements on square footage, usually around $100 per square foot.
- In my opinion, the right coverage not only protects your property but also meets mortgage lender requirements and shields you from financial losses in case of unexpected damages.
What is Dwelling Coverage?
Dwelling coverage is a type of condo insurance that protects everything you own within your condo. This includes your walls, floors, fixtures, furniture, and even appliances.
However, natural disasters like earthquakes and floods are usually not included, so additional policies may be necessary.
Why Do You Need Dwelling Coverage?
Mortgage lenders typically require you to have dwelling coverage to protect their financial interests. If damage occurs and you can’t pay for repairs, the lender risks losing money.
How Lenders Determine Coverage:
- Percentage of Appraised Value: Some lenders may ask for coverage worth 20% of your condo's appraised value.
- Example: For an $800,000 condo, you’d need $160,000 in coverage.
- Cost Per Square Foot: Others calculate coverage based on square footage, typically around $100 per square foot.
- Example: An 800 sq. ft. condo at $100/sq. ft. would require $80,000 in coverage [1].
Types of Condo Dwelling Coverage
There are three main types of condo dwelling coverage. Choosing the right one depends on your condo's master insurance policy.
1. All-In (Everything Inclusive)
- Covers both interior and exterior surfaces of your unit.
- Includes installations, fixtures, and additions.
- Ideal for maximum protection but may be more expensive.
2. Special Entity
- Covers most fixtures and structures within the condo.
- Excludes unit upgrades or additions.
- Best for condos without custom upgrades.
3. Bare Walls-In
- The most basic coverage, protecting only the bare structure (walls, ceilings, floors).
- You’re responsible for insuring fixtures, appliances, and personal belongings.
How Much Dwelling Coverage Do You Need?
To determine the right amount of dwelling coverage for your condo, follow these steps:
- Find the Average Rebuild Cost: Ask a contractor or check local estimates. For example, $100-$150 per square foot is common.
- Calculate Your Unit’s Value: Multiply the square footage of your condo by the rebuild cost.
- Example: 800 sq. ft. × $150/sq. ft. = $120,000.
- Add Additional Costs: Include the value of your fixtures, appliances, and flooring.
Tip: Most policies use Replacement Cost Value (RCV), meaning you get the full amount to rebuild without factoring in depreciation.
What Does Dwelling Coverage Protect Against?
Here’s what a typical condo dwelling policy covers:
✅ Covered Hazards:
- Fire
- Windstorms and hail
- Theft or vandalism
- Falling trees
- Sudden water damage
- Lightning
- Weight of snow/ice
❌ Not Covered (Requires additional policies):
- Floods
- Earthquakes
- Wear and tear due to neglect
- Slow water damage
- Sinkholes
Choosing the Right Policy for Your Condo
Your condo’s master policy determines what you need to cover individually. Always check what’s included before selecting your dwelling coverage.
For the best results:
- Review the building’s insurance terms.
- Assess the replacement cost of everything you own.
- Compare multiple policies to find the best fit for your needs.
Final Thoughts
Getting the right dwelling coverage for your condo is a crucial step in protecting your investment. Start by calculating the rebuild cost, checking your master policy, and consulting a qualified insurance expert for guidance.
Still confused? Contact the team at Precondo and we’ll be happy to help.
References:
- https://www.allstate.com/tr/home-insurance/dwelling-insurance.aspx
