Cost & Coverage
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Your guide to understanding what condo insurance costs and how that cost is determined.
The cost of condo insurance can be a tricky thing to predict, as condos are covered by two types of insurance policies – your own condo insurance policy and your condo association’s policy, which is commonly known as the “master policy.” The extent of your own policy depends on what’s in the master policy.
There are two common types of master policies: all-in policies, which cover the building exterior, common areas and everything inside your condo except for personal property, interior improvements and renovations, and walls-in policies, which only cover the exterior structure of the building and common areas. Your personal condo insurance cost is often a reflection of how far-reaching or minimal your homeowners association (HOA) master policy is.
Whatever the cost may be, you’ll want to be sure your condo, your stuff, and your personal liability are suitably covered. You’ll also want to make sure you’re not paying too much for certain components of condo insurance coverage when you don’t need them. A good place to start is getting a good grasp of the basics of condo insurance and what is and isn’t covered under a standard policy. Beyond that, condo insurance cost is primarily reliant on the state you live in, your credit history, how much coverage you need, your deductible amount, and if you have certain features that can quality for discounts.
Read on to learn more about the cost of condo insurance:
Condo insurance premium costs differ from state to state for a variety of reasons. If a state has a lot of major cities and more densely populated areas, it’s more likely to have higher premiums, as home and condominium values are generally higher. States with a higher incidence of natural disasters also generally have higher premiums than northern landlocked states that don’t experience as many. The average annual condo insurance premiums were $478, according to recently reported National Association of Insurance Commissioners (NAIC) data from 2015.
Here are the average annual condo insurance premiums in each state as of 2015, according to the NAIC.
|State||Average annual condo insurance premium||State||Average annual condo insurance premium|
A common trend in four of the most pricey states for condo insurance is that they all experience a great deal of extreme weather: hurricanes in Florida and Louisiana and twisters in Texas and Oklahoma.
But what is New York doing there? As far as homeowners insurance costs go, New York is about the middle of the pack, so why is it near the top for condo insurance?
The high rates probably have more to do with the cost of living in New York, and New York City, in particular. It may also be because there’s a higher volume of condo insurance claims in New York – the more claims there are in a geographic region, the higher the premiums will be for both that region and surrounding regions.
New York: $588
States that are sparsely populated and aren’t prone to bad weather and natural disasters offer bargain deals on condo insurance premiums.
While we don’t advise moving somewhere based on how much condo insurance premiums run, it’s helpful to understand why policies are cheaper in certain areas than others. As you can see, states with the lowest average premiums are more sparsely populated and are typically inland and northern, so they’re not as likely to experience tropical storms and not as susceptible to tornadoes as states on the coast or in tornado alley.
North Dakota: $263
South Dakota: $269
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Condo insurance companies factor in different kinds of potential risks when determining condo insurance rates. Some of these risks you have control over, and some you don’t.
Your HOA’s master policy
Your HOA master policy may be an “all-in” policy that provides dwelling coverage, liability coverage, and loss-assessment coverage if someone gets injured at the condo pool. All you would be responsible for is personal property coverage, and you’d have the option of adding additional coverage like loss-of-use coverage and additions and alterations coverage if need be. That’d be a pretty cheap policy.
The master policy may also be a more stripped down “walls-in” policy, which are the most common types of condo insurance policies. Walls in policies require the unit owner to add dwelling coverage for the condo interior, liability coverage if someone gets hurt, personal property coverage for your stuff, and any additional coverage you may need.
Not every all-in or walls-in policy is created equal and may have conditions and stipulations for when it will cover a certain component, so the cost ultimately depends on how robust the master policy is.
Location is a key decider in how high or low your condo insurance premiums run. Weather, population density, proximity to regions with a high-risk for forest fires, proximity to fire stations, and insurance claim frequency in a specified area are all taken into account when determining rates.
Most states allow condo insurance companies to check an individual’s credit history to determine their premium.
The condo’s age and condition
If you bought an old condo whose previous owner didn’t take very good care of it and never got the leaky plumbing fixed, the insurance company will consider the condo’s claim probability to be higher than normal and won’t insure it for cheap. Modernizing the unit and making renovations to deter further damage and costs down the road is a good way to keep your insurance premiums low.
How much coverage you want
When buying a condo insurance policy, it’s often up to the condo owner to decide just how much coverage they want. There are instances where this isn’t the case, and the mortgage lender will require specific coverage amounts for certain components like dwelling and liability coverage. It also may be the case that your insurance company offers you a specified dwelling coverage limit (with say, an 8%-10% variance) and doesn’t allow for much wiggle room other than that.
Otherwise, your personal property coverage, liability coverage, additions and alterations coverage, loss-assessment coverage, medical payments coverage, and any floaters or additional coverage types are up to you, the policyholder.
A deductible is the amount you pay out of pocket in the event of a claim. Deductibles usually come in amounts of $500, $1,000, or $1,500. The general rule of thumb in insurance is lower deductible, higher premiums; higher deductible, lower premiums.
Condo insurance discounts
Homeowners insurance companies offer numerous discounts and bundles that can lessen that monthly or annual premium. It’s common for home insurance and auto policies to be bundled together, and that bundle can mean big savings; loyalty discounts are also common if you’re with the same company for a set number of years; and lastly, try filing infrequent claims or no claims at all (for the small stuff at least) – you may be rewarded with a pretty good discount.
Condo dwelling coverage: We know that the extent of your dwelling coverage depends on your building’s master policy. If it's walls-in, you’ll need to cover the structure of the condo interior – the floors, cabinets, carpets, lights, inner walls, built-in appliances, and pretty much everything that came with the condo when you moved in. Coverage for the interior of your condo should equal its full replacement cost, or what it’d cost for a full rebuild.
Condo personal property coverage: Personal property coverage should be enough to cover your clothing, appliances, furniture and electronics if they’re damaged, stolen, or destroyed by a covered peril. Condo insurance will replace any damaged or stolen items up to a certain limit. Certain types of property, like jewelry and expensive art, may not be covered by your personal property coverage and you may need to add an umbrella policy to increase the limits of item-by-item coverage.
Condo liability coverage: Condo liability coverage should be enough to cover legal fees, but financial assets – like the condo itself, investments, and anything else with a dollar amount attached to it should be covered as well. If $500,000 in coverage isn’t enough (typically the maximum liability coverage amount in a condo insurance plan), you can add an umbrella policy to increase your liability coverage amount.
Loss-of-use coverage: Loss-of-use covers your relocation, housing, food and living expenses up to a certain limit, and is usually about 20% of your total dwelling coverage.
Condo additions and alterations: Should be enough to cover any renovations or improvements you made to the apartment. Additions and alterations coverage is usually only necessarily if your HOA has an all-in master policy, as the dwelling coverage under a bare walls policy would cover additions and alterations insofar as you update your policy’s coverage limits.
Loss-assessment coverage: Coverage for you and condo owners if the condo building’s common area or property is damaged or destroyed by a guest or condo resident. Condo owners pay an equal amount to cover for the damage, and are reimbursed by their policy’s loss-assessment coverage. Most condo insurance companies put loss-assessment coverage at about $25,000.
Considering condo insurance but want it on the cheap? Let our licensed experts help you understand your building’s master policy and find the most affordable coverage options for you.
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