Co-ops & Condo

Insurance for co-ops and condos is a lot more complicated than homeowner insurance. A lot of people invest in condos without understanding the full implication of their responsibility or may run into a series of frustrations and surprises because they didn't understand how their condo insurance works. Co-ops also have their own issues, very much like condos.

You can avoid problems and save money by understanding exactly how your condo or co-op insurance works, how it relates to your association policy, and what your responsibilities will be if you have a claim.


Do you really need condo insurance?

very condo owner or co-op owner should have their own insurance. One of the problems that owners face when purchasing condos or coops is confusion about the insurance. Unlike homeowners, they do not always need to provide a binder of insurance to the mortgage company, because the basic building itself is insured on the condo or homeowner association policy. This sometimes leads condo owners to think that everything is covered, so they forget about purchasing the individual policy.

This step-by-step will take you through the insurance basics of owning a property like a condo and a co-op as well as tips to help you figure out the coverage you need so you don't have any surprises or extra expenses in a claim.

Your own condo insurance covers:

When you own a condo or co-op you will have two insurance policies that cover your investment in your unit and personal belongings.

  • Your own insurance policy.
  • The master policy, which is managed by the condo association, homeowners association, or co-op board.

Your own condo insurance covers:

  • Your Personal Liability
  • Your Personal Property
  • Your Improvements, Betterments, Additions, or Alterations
  • Loss Assessment

In addition to the basic coverages, condo, and all residential insurance policies contain numerous clauses which limit coverages on certain items of high value. Depending on how relevant each of these coverages is to you personally, you may also want to learn more about a rider for jewelry, fine arts or other limited items, as well as umbrella liability.

Your insurance representative will be able to review your coverage options and recommend suitable insurance endorsements if you would like to adjust or improve your coverage.

Claims Problems Specific to Condo Owners

When you have a claim that involves the building and your unit, you are not just dealing with one insurance company or policy. A condo or co-op owner will have to rely on both the building master policy and their own policy to settle the claim. Sometimes if a third party like another unit owner is also involved and you feel they were negligent or responsible for the damage, then the insurance of the other unit owner may also come into play. All insurers will have to figure out what each party's actual loss is and who is responsible for paying before settling the claim. This is often a several step claims process.

A common type of claim in condos and coops where several of the insurance policies are required to pay out is water damage claims. Depending on the type of coverage the master HOA policy has, you may also run into gaps in coverage. Don't get stuck in a difficult or unexpected claim situation.

What you need to know about condo insurance?

We are going to cover everything you need to know about the insurance implications for your condo insurance so that if a claim happens you know exactly what you're in for, and how to get the best claim settlement. Including:

  • Condo Insurance: Unit Assessment Coverage and Shared Areas
  • Questions You Need to Ask Your Condo Association about the HOA Insurance
  • Understanding All In vs Bare Walls In HOA Master Policy Coverage
  • Major Risks and Perils Not Automatically Covered In Most Condo and Co-op Policies
  • Warning: Not Reading Your HOA or Condo Association Insurance Policy Could Cost You Hundreds Of Thousands of Dollars

First, let's start with the difference between condo and co-op, and homeowner insurance.

Difference Between Condo Insurance and Home Insurance and Co-ops

The main difference between insuring a condo, co-op or house comes down the parts of the home you own. When you own a house, you own everything. This includes everything inside the house, its structure and even the land on which the house sits. When you own a condo or have shares in a co-op on the other hand, you are only responsible for the space within your walls. Everything else, hallways, common areas, etc., those parts are usually covered by a collective homeowners association insurance policy. Co-ops and condos have virtually the same type of insurance since the main difference between the two types of homes are how they are owned and managed.

Although co-ops and condos may seem quite similar as living spaces, they are actually very different legally and financially. Because of the legal differences between condos and co-ops, the way they are insured varies.

Getting the Best Insurance for Your Condo or Co-op To understand condo insurance and co-op insurance we need to look at the difference between condos and coops and how the needs for these types of homeowners vary from standard single-family homeowners needs.

How does a co-op work?

Co-op's (sometimes referred to as coops) are owned by a corporation, which means that as an owner of the unit, you don't actually own the building or the property, what you do own is a share of the holdings of the corporation. Small co-op's may only have two or three owners, whereas large co-ops may have hundreds of shareholders. In the event of a loss, the share of ownership in the building will come into play. Think of co-ops as multi-unit apartment buildings. The building has one owner: the corporation and the residents are tenants. The way they get the right to live there is via the purchase of shares in the building. They do not own the walls or any specific part of the building. The co-op management is taken care of by all members (shareholders), like a community. The building is a, therefore, a communal property that may be unevenly divided based on the number of shares each "owner" has purchased.

How does a condo work?

Condo's are owned by the condo owner. The condo owner usually owns their unit from the walls inward. Condo owners are property owners of their unit. The condo building is made up of all the individual units, plus the common areas or shared areas. A master insurance policy is usually responsible for insuring the condo structure as a whole, including the shared areas, and then each individual condo unit owner is responsible for protecting their personal liability, their specific unit features (additions, alterations, or upgrades) as well as their personal property.

Why is the condo or co-op insurance different than home insurance?

As you can see by the definitions above, the owner of the building is different in all of these situations.

Condo Insurance and Owner Responsibilities

In one circumstance you have the condo, where the owners own the unit they have purchased. This means that they potentially own the walls, ceilings, and floors of their dwelling, but not the building itself. So in a condo, the owner has to insure the unit and their contents.

Home Insurance and Owner Responsibilities

In a home, you have one owner for building and contents and responsible for anything that happens as a result of your actions or ownership of your property. It is pretty straightforward.

Co-op Insurance and Owner Responsibilities

Whereas owners of a co-op do not own their unit at all, they are only owners of a percentage of the building, which means that the insurance they need for their personal property is really very much like a tenant policy. And a separate policy will cover the building managed by the corporation. The tenant insurance would be in the co-op owner name, and the building will be in the corporation's name.