Entering into buying a condo eases the learning curve of home ownership but also comes with its unique challenges. You're going to have a lot of the basics covered by the HOA but also have to learn what responsibilities still fall on your shoulders. One of the primary questions you should ask when buying a condo is about insurance.
You know of fire, earthquake, and master policies, but if you live in a condo, there's another type of protection you will want to have. This third line of defense is called an HO6 policy and covers items that are not personally yours nor the very walls of your unit. HO6 covers things like the counter, sink, cabinets, and other items which are assumed to be part of the house but feature came after the initial build but before you moved in.
Fire insurance covers the walls and structure and renters insurance covers all your personal items, but if the items in between filled with undivided interests are not included there could be a gap of coverage in a total loss situation. This void came into play years ago and went from a policy most in the industry overlooked to a must-have. All mortgage policies require HO6 on a common sense basis. They need to know you are completely covered in a total loss situation. And you shouldn't be wondering if you will be coming home to a skeleton of a house or a move in ready situation after a total loss? The mortgage company won't accept sub par security and neither should you.
Here's what you do
Technically, you bought the space in the condo, but that may be considered it when it comes to their specific insurance. This is the "undivided interest" we talked about earlier. If you just have fire insurance, your loan officer will require a personal HO6 policy to be put into place.
Talk to your home owners association as they may already have the right policy in place. You'll want to ask if a master policy with "walls in" endorsement is in place. If this policy is in place, you don’t need an Ho6 because insurance will cover to losses to be built back as is. If there is not a "walls in" endorsement, you need an additional Ho6 for items such as cabinets, fixtures, countertops, refrigerators, sinks, and toilets.
The Language Can Get Complicated
Since there are single family residence, multi-family, and commercial policies which all have varying levels of coverage you will want to be clear on what policy you have. Your loan officer will be making sure you have everything you need, but if you want them to translate your policy or that of the HOA for you and put it in understandable terms, they'll be happy to do so.
This is all to make sure your future is covered. The worst thing after a catastrophic event is to have to fight with insurance over things you thought should have been covered. Although it would seem common sense that an insurance policy would cover structures inside the condo, the now standard HO6 policy has you covered.
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