Even though homeowners, condo, and co-op insurance consist of similar policies, the type of coverage they offer differs. The structure of the home determines the type of coverage you should get for your home. To make the right choice, you need to know the difference between homeowners, condo, and co-op insurance in the state of Connecticut.
Understanding the Difference between Three Types of Insurance Coverages
The primary difference between insuring a house, condo, and co-op insurance is ownership. When you own a home, everything belongs to you. You own the inside of the home, its structure, and the land you build the home on.
When you own a condo or own shares in a co-op, only the things within the confines of the property belong to you. The homeowners association insurance policy covers the common area, hallways, and other parts of the property.
Both condos and co-ops have the type of insurance coverage, as the only difference between the two is ownership and management — i.e. who owns and manages them. To understand the differences between these three types of insurance coverages, you need to examine the three sections of property insurance — dwelling, personal property, and liability.
Dwelling coverage covers the structures situated outside the home. These structures include the walls, ceilings, the roof, floors, sheds, swimming pools, fences, garages, etc. If there is a physical structure situated on the land you have built your home on, you are responsible for that too.
If you have condo or co-op insurance coverage, you are not responsible for the structures outside your property or any physical structure located on the same land as your property. Even though your condo or co-op complex may have a swimming pool and a fence, the condo or co-op association insurance will cover any damage that occurs in those areas.
If you own a condo or co-op, you are only responsible for the damage that occurs inside your property. For instance, if your condo or co-op’s kitchen catches fire and is destroyed, you will require insurance to pay for the damages.
Read the Fine Print: Condo or Co-op Association’s Insurance Policy
A condo and co-op complex’s insurance policy typically covers damages sustained to common sections of the property such as hallways, parking lots, swimming pools, etc. In some cases, the condo and co-op complex’s insurance policy may even cover the interior of the property.
You should examine your condo or co-op’s insurance coverage with your insurance agent to determine what the policy covers. In some instance, the building coverage might cover your property as it was initially constructed, meaning you would only insurance coverage to cover any improvements you make to the property.
For instance, you decide to replace the original cabinets of your home with new cabinets, causing the value of your property to increase by $12,000. Therefore, you will need to cover the additional $12,000. In other instances, your condo or co-op association coverage might not cover the kitchen or other sections of the property, except for the walls, ceilings, and floor.
Do take the time to examine the condo or co-op association’s policy coverage closely, as it is crucial that you understand what parts of the home they offer coverage for, and how much coverage you require beforehand.
For the sections of the home they do not cover, you will require additional coverage and you do not want the separate policy you take out to cover your property to overlap with the condo or co-op association’s policy.
If you do not read the fine print or do not go over each detail mentioned in the condo or co-op association’s policy and take out a separate policy, you will end up spending more money on insurance than you should have. The opposite is also true for people who are underinsured.
If you are underinsured, you will find yourself paying a lot of money for damages because the condo or co-op association’s policy don’t offer coverage for it. To avoid confusion, you should consult with an insurance agent who will sit down with you, examine the condo or co-op association’s policy, and advise you on the type of insurance policy you should personally take out to cover certain aspects of the property not covered by the association.
In comparison to owners of a condo or co-op, homeowners require liability coverage, as they own additional structures. In the event someone injures themselves while present on your property, your liability coverage will go in paying for lawsuits lodged against you by the injured party.
If you own a house, visitors can injure themselves both inside and outside your home (backyard, trampoline, swimming pool, etc.). If you own a condo or a co-op, the association, not you, are liable for any injuries that occur in the swimming pool of the complex.
You can get smaller liability coverage if you own a condo or co-op, but experts in this area recommend you obtain the same amount of liability coverage as a homeowner. You can never predict how costly a person’s injury can become after you combine the legal and medical fees together. In the end, the liability coverage you take out should equal to the number of assets you currently own or are likely to own at some point.
Personal Property Coverage
The percentage of the complete coverage for personal property coverage is the difference between these three policies. Basic homeowners policies are insured for 25 percent to 50 percent of the person’s dwelling coverage.
For instance, if you obtain a $250,000 policy coverage, you would receive $100,000 of personal property coverage on it. However, your condo or co-op will not need you to take out a dwelling coverage worth $250,000, but you will still need to take out a personal property coverage worth $100,000.
To understand how much personal property coverage you require, you need to assess the value of the personal property in your home. Your condo or co-op association’s policy will not cover your personal property in your home so ensure you take out enough personal property coverage to reflect the value of the personal belongings in your home.
Start by creating an inventory of the most valuable items in your home and write down how much they might be worth next to each item. In the event of a disaster, you can file a claim with your insurance company to replace the lost or damaged items in your home.
The Cost: Homeowners, Condo, and Co-op Insurance
Homeowners insurance is more expensive than a condo and co-op insurance. With a condo and co-op, you require minimum dwelling coverage, thus decreasing the cost of the policy. The average cost of obtaining homeowners insurance comes to $952 each year whereas the cost of obtaining condo and co-op insurance comes to $400 to $600 each year.
Underinsured: Do You Have Sufficient Insurance Coverage?
To avoid paying out of your pocket, you need to insure you have sufficient insurance coverage regardless of the type of insurance policy you hold. Natural disasters such as tornados, hurricanes, earthquakes, and wildfires can devastate a home. In fact, after the disaster has hit Connecticut, you might not even have a home left.
Most people fail to consider these factors when buying a homeowners, condo, or co-op insurance policy. When an unfortunate incident occurs, their insurance policy only offers inadequate assistance to recover their home from the disaster, leaving them with mounting expenses that they have to pay themselves using their own hard-earned money.
Another mistake people make is assuming their insurance coverage will automatically adjust the amount allotted to them, as the value of their property in the market increases and decreases. You need to consider the price of materials and labor required to rebuild your property after a disaster. Most probably, the cost to rebuild your property may be much higher than your property’s current value in the market.
Prior to obtaining insurance for your property, you need to ask your insurance company or agent to tell how much would it cost you to rebuild your home if damaged. To give you an estimate, the insurance company will consider factors such as:
- Unique features of the property
- Construction details
- Age of the property
- Any costs associated with complying by the requirements of the updated building codes
Through the years, your insurance coverage needs can change, which is why it is pertinent that you review your policy coverage after two to three years.
Standard Homeowners Policy Offers Insufficient Coverage
Even though you might think you have sufficient coverage, a closer looker at your insurance coverage will reveal the opposite. You might still require more insurance coverage, especially if you consider that the cost of materials and labor tends to increase with time, more so after a natural disaster strikes.
If you want to protect yourself from the damage caused by natural disaster, consider take out an extended insurance coverage. An extended insurance coverage will add an additional 30% to the cost of repairing your house after a natural disaster.
Furthermore, you will pay additional for a law or an ordinance endorsement coverage that pays additional costs needed to reconstruct your property according to the local building codes. For instance, a standard homeowners policy does not include a sewer backup.
If you have additional insurance policies in place, you will not have to pay your own money for the damages. If you reside in a high-risk zone in Connecticut, you will require a separate insurance policy for wind, hail, and hurricanes.
A standard homeowners policy covers:
- Other personal belongings
Everything else such as expensive silverware, furs, artwork, and jewelry are not covered under a standard homeowners policy. To get them covered, you will need to buy a floater or a special endorsement. Keep in mind that all these extra add-ons to your insurance policy will increase premiums. You can offset the cost of premiums you pay by increasing your deductible costs, raising them to $500 to $1,000.
You can decrease your premiums by installing the following on your property, especially if you own it:
- Burglar alarms
- Dead-bolt lock
- Smoke detectors
- Sprinkler system
- Impact and fire-resistant roof (asphalt, cement, metal, or rubber material)
- Noncombustible siding
- Storm shutters for windows and doors
With kitchen fires as one the top causes for damages, you need to ensure you do not leave the stove on and always keep a fire extinguisher nearby. It is important you to take measures to decrease the risk of damages that can occur due to factors that you could have controlled to avoid the damage in the first place.
You need to ensure your insurance agent explains to you in detail about the type of policy you are planning to buy. If you are obtaining a condo or co-op insurance policy, your insurance agent should inform you about your responsibilities as a member of the association.
If they are unable to explain it to you, you need to visit an insurance agent who can, as this is critical in helping you obtain the right amount of coverage. You should contact your neighbors on who they went to obtain homeowner coverage and if they have opted for loss assessment coverage.
You also need to determine the amount of loss assessment coverage you require. In addition to this, you need to speak to someone from the association to determine if they have sufficient insurance coverage to protect the association and your property.
Now, you know the difference between homeowners, condo, and co-op insurance so make the right choice for your home, family, and budget. By being informed about the different types of insurance coverages you can obtain, it will help you minimize risks associated with inadequate insurance coverage.