Do You Need Homeowners Insurance if You Live in a Condo or Townhouse?

It's a question many condo and townhouse owners don't ask, and neglecting the issue can lead to an unpleasant surprise down the road. Many people assume that insurance coverage is the responsibility of the condominium or townhouse association and that the monthly maintenance fees they pay cover such matters. It's a dangerous assumption, and as is often said, ignorance is no defense in matters of the law.

The fact is, homeowners insurance, as it applies to owners of condos and townhouses, is never a clear-cut matter, and it's well worth consulting with your insurance agent to ensure that you have proper coverage if and when you need it.

The Master Policy

The main difference between homeowners insurance applying to homeowners and to condo or townhouse owners is that the condo or townhouse association holds what is called a master policy that provides coverage for some, and this is crucial—aspects of the living space you are occupying. Your condo or townhouse association can provide you with a copy of the master policy upon request, and it's a very good idea to bring it with you when you consult with an insurance agent to ensure that there are no gaps in coverage when you arrange your own homeowners insurance.

This is where things get complicated: determining exactly what is covered and what is not. Basic master policies may cover nothing more than the structure of the unit. Everything else, such as cabinetry, appliances, rugs and electrical fixtures might not be included. One item that is nearly always included in any master policy is liability insurance covering common areas like the lobby or the elevators.

Basic Condo Insurance

Condominium and townhouse homeowners insurance is in many ways a combination of standard homeowners insurance in which the structure and the owner's possessions are covered, and renter's insurance that covers only the renter's physical possessions, leaving the building and fixtures to be covered by the landlord's master policy. A basic condo insurance policy will provide coverage for a set number of "named perils," which may include vandalism, electrical power surges, damage to window glass, damage from vehicles and certain types of water damage that typically do not include flooding. Personal liability and medical payment coverage are also included.

How Much Coverage Do You Need?

You've come this far and have opted for the peace of mind provided by homeowners insurance, but there's one more decision that you'll have to make: just how much coverage is really necessary? Again, by consulting with your insurance agent you can learn what the limits are on basic coverage and what your options are when it comes to replacing damaged items. For example, a 5-year-old television set will have a standard "actual value" that will be the amount of compensation. However, in most cases the "replacement value" of the television set will be more than the actual value, and this needs to be taken into consideration when formulating your policy.

Filling the Gaps

All in all, a well thought out homeowners insurance policy will provide owners of condominiums and townhouses optimum coverage in any eventuality at a typically lower cost than comparable policies for homeowners. By doing a little research and consulting with your insurance agent, condominium and townhouse owners can fill any gaps between what's covered by the condo association's master policy and what is not. It's one of the few cases where money can buy happiness, in the form of security and peace of mind.