What condo insurance covers

If you own a condominium or plan on buying one, understanding condo insurance will help make the experience less stressful.

Condo – short for condominium – insurance coverage works in tandem with the condo association master policy. The condo association is formed by the owners of the individual condo units. The unit owners meet and elect a board. The board is responsible for things like maintenance, bill paying, rules and purchasing insurance.

Generally, a condo association insures the building and common elements under a single policy, called the master policy. This policy typically provides one of three kinds of coverage: The basic building (walls, roof, floors, elevators), but not unit items (such as appliances, carpeting, cabinets wall coverings) and in some cases not interior walls; the basic building and unit items, but not additions or improvements made by you at your expense; and the basic building and unit items, including additions, alterations and improvements. All master policies will include liability coverage in the event someone is injured in the common areas of the property. In 1980 Pennsylvania adopted The Pennsylvania Uniform Condominium Act. This act governs the formation and operation of condominiums. If your condo is located in Pennsylvania, your association should be following this act.

When a master policy is in place, you'll need to purchase an individual policy to cover the items and changes in your unit not covered by the association master policy, including your personal property, personal liability and assessments made against all members of the association. You also want to consider coverage for damage to your unit not compensated because of the master policy deductible.

A typical condo unit owner policy includes coverage for several things the master policy does not cover. Personal property coverage provided under a condo unit policy covers your clothes, furniture, electronic equipment and other household items for their replacement value or their actual cash value (original price, minus depreciation). Your property is usually covered whether it's in the unit or anywhere in the world. Loss of use coverage applies if you temporarily have to live elsewhere because your condo was made uninhabitable by a fire or other covered peril. The policy will reimburse you for the portion of hotel bills, meals, laundry and other living expenses that exceed what you would pay if you were living in your home. Personal liability coverage protects you if others make a claim or bring suit against you for physical injuries, bodily injury or property damage.

Review your building's insurance documents and bylaws with a qualified insurance agent early in the purchasing process to make sure you comply with all requirements and purchase adequate coverage for your home.

Your condo unit owner policy's price, or premiums, depends on the amount of coverage, the deductible, and any applicable discounts and charges. Recently I read an article that people believe most insurance agents recommend more coverage than they need. The reality was that agents will offer less coverage than needed just to get the sale. A knowledgeable insurance agent can help you find the right balance for your home and family.

Mortgage lenders will require the master policy to list them as mortgage holders. These lenders will also require proof of a unit owner's policy before they approve a purchase. If you are in the market for a condo unit, contact an insurance agent right away to get the process started.

Bob Hollick is a State Farm Insurance agent based in Washington. His column appears every other Friday in the Observer-Reporter.