Last Updated on October 6, 2020 by Andrew Lee
HO-6 insurance is a condo insurance policy specifically designed for apartment and condo owners to provide protection for the condo’s internal structure. This policy includes the owner’s personal property located inside the condo. Our guide will cover the most essential information about HO-6 condo insurance. Many building associations require you to purchase HO-6 condo insurance before you can own an apartment in the building. The HOA insurance covers external damage to the building, so you won’t have to purchase coverage for building structures if the building is damaged. HO-6 policies are exclusively designed to protect the premises of your condominium.
HO-6 condo insurance is the main insurance policy for condo owners. Similar to how HO-3 and HO-5 policies are designed for homeowners, HO-6 policies are designed for condo owners. This insurance policy is becoming more popular as many Americans purchase condos to stay close to the city or live close to their jobs that offer new opportunities and lifestyle options. If you’re on the market for a condo, you have to make sure it’s protected by purchasing a comprehensive insurance policy. This is the best way to protect your investment and a crucial part of successful long-term financial planning. There are different sub-types of HO-6 insurance that we’ll cover below.
Is HO-6 Insurance Mandatory?
HO-6 condo insurance is mandatory by most building associations in the US. The building association requires tenants to purchase their own condo insurance and this is also necessary when you’re getting a mortgage to actually purchase the condo. The bank will require an insurance policy on the condo as it provides protection from a number of penalties and legal repercussions. The bank/building association won’t require insurance for the entire complex structure (which you’re NOT held responsible for), but they will require insurance for the condo as you’re directly responsible for all repairs and replacements in the internal portions of the condo. That being said, getting your condo insured is a no-brainer.
For tenants renting a condo, HO-6 insurance is not required. On very few occasions, you may have to purchase renters insurance. However, it’s up to the landlord to insure the condo. There are separate HO-4 renters insurance policies that are exclusively designed to protect the tenant’s personal property within the condo. Under this policy, you can make a list of all personal belongings in the condo and insure them. The landlord has to take out a separate DP3 (landlords insurance) policy to cover repairs for tenants. The bottom line is that if you’re renting, your main option is HO-4 insurance for personal belongings and liability.
HO-6 Condominium Insurance: Are You Already Covered?
If the building you reside in has a master insurance plan, you won’t require HO-6 insurance. The building may be insured under a master umbrella insurance policy which is purchased by the building association or the local HOA. All tenants have to contribute to this with yearly taxes and this covers them for external damage to the building such as the walls and roofs.
Building insurance covers the communal interior of the building such as the hallways and elevators. In some cases, the master insurance policy will cover also individual condominiums in the building. There are 3 master insurance policies available:
- Bare Walls Insurance. This coverage policy is the most common form of insurance for building associations that covers the external structure of the building as well as the common areas and internal furnishings. All common property owned by the condo association is covered under this policy. If your building has bare walls coverage, you will have to purchase your own HO-6 insurance.
- Single Entity Coverage. This insurance policy provides the same protective benefits as bare walls coverage for the building, but it also covers property in the individual condo units. If the building has single entity coverage, you won’t have to purchase an HO-6 policy.
- All-In Coverage. This is a master policy that covers the entire premise of the building including individual condominiums. It is the largest master insurance policy available, and you won’t have to purchase an HO-6 policy if your building association has this type of coverage.
What HO-6 Condo Insurance Covers
The average HO-6 condo insurance policy will cover you for all structural damage to the condo including personal property and legal damages. The following is the most important coverage you’ll receive with your HO-6 policy:
- Condo Repairs/Damage. The entire condominium unit is covered for structural damage. This includes the walls and fixtures inside the condominium and it includes damage caused to the balcony.
- Personal Belongings. All personal belongings inside the condominium such as your clothes, electronics, and other valuables are insured under this policy. For renters, there’s an HO-4 policy that can insure their personal belongings only.
- Legal Liability. The condo owner is covered against potential lawsuits and legal expenses if they’re sued by a neighbor or the building association itself.
- Loss Of Use. If the condo is uninhabitable, the insurance company will cover their living expenses until repairs are carried out. This includes transport and lodging.
HO-6 policies are very similar to HO-3 policies because they’re designed for property owners and provide the same basic coverage such as structural damage, personal belongings, legal liability, and living expenses. The main difference is that HO-3 policies cover the exterior of the home while HO-6 policies cover the unit from the “walls in” and don’t include the hallways and other communal property.
Pro Tip: Even if your building association offers internal coverage for tenants, you should still take out an HO-6 policy to cover any potential gaps that the HOA/building association might leave out in their master insurance plan. If your personal property is damaged, you may not receive full compensation unless you individually insure every item in your condominium. This is why purchasing an HO-6 policy is smart even for condo owners who already possess building insurance coverage.
What HO-6 Condo Insurance Does NOT Cover
The HO-6 insurance policy may not cover certain things such as structures you don’t actually own and named perils. The following are the most important things to be aware of:
- Property Outside The Condo. The HO-6 insurance policy will only insure you for the property you actually own. This means you’re only covered for the internal structure of the condo. If there are any damages or repairs required to the external structure of the building such as the facade or the common areas (hallways, stairs, elevators, pools, etc) this will NOT be covered by your HO-6 policy.
- Named Perils. There are some perils that the insurance company won’t cover for condos. While HO-6 plans are usually “open peril”, damage caused by earthquakes, floods, insects, and nuclear damage is usually not covered. These are “low risk “events that the insurance company does not insure by default, and you can purchase additional coverage in order to add them to your existing HO-6 policy. Note: Low-risk events may be covered by the building association.
- Vacancies. If you purchase a condo as a second home or an investment, there are certain rules that apply in regards to vandalism. For instance, the insurance company may refuse to pay compensation for repairs if the condo was vandalized after it was left vacant for more than 60 days. If you don’t plan to live in the condo you’ll have to consult the insurance company to purchase adequate coverage such as DP-3 landlord policies and short-term insurance.
How HO-6 Condo Insurance Works
HO-6 insurance works by combining “open perils” and “named perils” for the internal structure and belongings. In this insurance arrangement, the internal structure of the condominium is covered under an open perils policy whereas the personal belongings are covered under a named perils policy.
Open perils mean that you’re covered no matter the cause of the accident: fire, smoke, theft/vandalism, storm damage, explosions, and more. Named perils are a set of perils that you can file a claim on by providing proof it was one of those perils that caused the damage. Check your policy to see which perils are listed for personal property. If certain perils such as water damage are not named, you’ll have to add them to your policy individually.
The HO-6 condo insurance will also include other categories such as legal liability and loss of use. The coverage will entitle you to a certain amount in legal protection which you can utilize as financial aid if someone is injured on your property or if a neighbor presses charges against you. Liability insurance can cover them for their lost wages or medical expenses in the event of serious injury in your condominium. If your condominium becomes unlivable while repairs are carried out, the insurance company will cover you for your living expenses including transport, lodging, and food.
Pro Tip: Install smart security devices in your condo for extra protection against fire, theft, and gas leakages. This will not only make your dwelling safer, but many insurers will lower your premiums and give you discounts for making your condo safer. Most smart devices are cheap and they can save you serious repair expenses by alerting you of potential dangers.
HO-6 Condominium Add-Ons/Upgrades
There are certain upgrades & add-ons that you can add to your existing HO-6 policy for additional coverage. These can be bundled with your existing insurance plan for maximum protection. For instance, you can add high-risk event insurance such as earthquake insurance if you live in an earthquake zone. While condominiums rarely get flooded, if you live on the lower floors you can also add flood insurance to the policy. The following upgrades are available for HO-6 plans:
- High-Value Item Coverage. If you possess jewelry, watches, artwork, antiques, or any valuable items in the household they will not be insured under the standard personal property coverage. Most companies cap that coverage at $1000-5000. You have to report high-value items individually and provide proof of value in advance.
- Earthquake Coverage. If you live in an earthquake-prone area, you can take out coverage for this particular peril. Earthquake coverage is not included by default in HO-6 plans.
- Flood Coverage. If you live near a water body with a high risk of flooding, you can add flood insurance to your HO-6 policy. This will entitle you to repairs if the condo gets flooded. It also provides extra coverage against sewer backups.
- Special Assessment Coverage. This extra policy can help out if you need to pay for building repairs. In some cases, the building association may not be able to afford a repair because it exceeds the total policy limit. The building association then has to ask for payments by individual condo owners. If you have to pay for a building repair, this policy will provide the extra coverage you need.
- Umbrella Policy. This policy provides the maximum coverage for condominium owners and covers you in all categories for all possible perils.