What Is the Difference Between Condo and Homeowners Insurance?
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If you’re purchasing a property in the U.S. there’s one key choice you might not be thinking about until the final moment: insuring yourself adequately. Whether you’re buying a unit in a high-rise or a single-family home, your insurance needs are distinct. In this context, understanding the core of condo insurance vs home insurance can help you choose the policy that has coverage according to your needs.
If you are purchasing a condo, you are buying an individual unit and not the building itself. Owning the unit affects everything with insurance and the interior is yours. An HO-6 policy is a special type of condo insurance. It provides coverage for your interior walls, floors, fixtures and personal property, along with coverage for your personal liability.
Condo ownership is different because there are two policies that are always in effect. Your condo association has a master policy that covers the exterior, roof, and common areas of the condo, including the hallway, elevators, and lobby. Your personal policy is where your master policy ends. The hard part is that how one differentiates between the two is dependent upon the type of master policy your association has.
One of the best things a condo buyer can do is to read the master policy for your association before shopping for coverage for themselves.
The responsibility of a household is totally different from that of a homeowner. The land, the structure, all the walls, the roof and any detached buildings on the land belong to you. Homeowner insurance is usually an HO-3 policy that goes with this full ownership, including garages, sheds, fences and the whole structure from the foundation up.
Premiums take into account a lot more square footage and rebuilding expenses for homeowners. According to the Insurance Information Institute, the average American homeowner is spending about $1,915 a year on insurance.
This is a replacement cost figure, that is, the replacement price of the home, based on the current prices of labor and materials, not the current market price of the home. A standard plan covers personal property, personal injury liability should someone get hurt on the premises, and hotel or temporary living expenses, if the home is rendered uninhabitable.
One thing is very important here: The difference is not only one of price. It’s about what each policy’s legally and financially accountable to safeguard.
Homeowners insurance protects the entire house, including any structures that don’t form part of the main home. The condo policy will only cover the interior of the unit as the master policy will cover the exterior and shared spaces of the unit.
Personal property and personal liability coverage are similar in both. Both policies respond in the event of damage to your furniture in a fire and if your guests are injured. The extent of liability is a little different too as a homeowner’s liability will cover the property whilst a condo owner’s personal policy will be confined to the unit.
They both cover loss of use. If you are a condo owner or home owner, if the property is uninhabitable due to an event, it will cover temporary living arrangements, food, and additional living expenses while your home is being repaired.
In most cases, yes. Since the condo owner is only responsible for the interior of his or her unit, the coverage amount is less and the premium is less, as well. The average cost of a condo owner’s policy is between $455 and $500 annually, while the average cost of a standard homeowner’s policy is approximately $1,900.
That gap is due to the simplicity of the math. The fewer properties insured, the less that the insurance company can pay out, and the lower premiums you have to pay.
Both are greatly influenced by location. Homes in the coastal states, wildfire prone areas or high-risk urban areas will cost more than those in lower-risk areas. Other factors that affect your rate are your claims history, credit score, and deductible you are choosing.
If you’re thinking about condo insurance vs homeowners insurance cost, the most important part to consider is what you’re on the hook for covering. The homeowner is responsible for the complete cost of the reconstruction of the home. A condo owner only insures the interior and the association takes on the structural risk under the master policy.
For condo owners, the particular kind of master policy that your association has will influence the kinds of coverages to incorporate in your own policy and what you’ll have to pay. The fees for individual coverage increase under a bare-walls master policy, which puts more of the responsibility on the individual unit owner. The opposite of this is an all-in policy, which will make it easier to fill your gap.
Lauren Lewthwaite Lauren Lewthwaite has been freelance writing for almost five years writing content that ranges from health to insurance and everything in between. Lauren is also a trained translator in French and English and is a dog-mom to an adorable Australian Shepherd.
