Note: This is a Q&A I created for an insurance agent who provides special insurance policies for townhomes and condos. This was one of a series of several articles on very specific types of insurance the agent offered. It also ran with a campaign of accompanying videos.
My agency offers a very competitive insurance policy for people that live in townhomes, homes, or condos that are part of an HOA (home owners association). I frequently get questions about how it all works, so hopefully this can serve to help inform you on your options.
Question: How much does insurance for townhome or condo owners cost?
Answer: It always depends on your own situation and your particular insurance carrier, but I offer policies with costs that start at about $120-130 per year, all the way up to $500 per year. A lot of it depends on the kinds of things you have inside your home (valuables) like jewelry, cash, guns, etc. I’d say the average premium for my clients is about $180/year.
Question: What does condo owners insurance cover?
Answer: Condo owners policies are called (HO 6) policies, and they’re designed for homes inside an association. We start with the basic coverage you’d expect, but then there are two things all of my policies always cover: the first is building coverage, which covers the things that your HOA or Condo Association doesn’t cover, and the second is loss assessment coverage. I do this because as an agent, I’m not going to let you have a policy that is so bare bones that doesn’t have those two riders because they’re so important for people that live in an association.
Question: What is loss assessment coverage?
Answer: In simple terms, a loss assessment is an endorsement that you have on your (HO 6) / condo owner policy. Many Colorado Springs homeowners associations have a very large deductible for wind and hail damage, over a million dollars or more. So if your condo or townhome gets hit by wind and hail, and your HOA has a million dollar deductible, the problem is that the association will have to pay that deductible. But if they don’t have a million dollars in their HOA coffers, you as the homeowner will have to pay out of your own pocket. The way they’d do this is just divide the deductible by the number of homes inside their association. So if you have, for example, 125 homeowners inside the HOA, they’ll take $1 Million and divide it by 125, which equals $8,000 per home. So everyone inside the HOA will have to pay 1/125th of the million dollar loss assessment, which is $8,000. Since you live in the HOA which has ownership rights to your property, you will have to pay it within a certain amount of time, it’s not negotiable. So what if you don’t have $8,000 in your bank account to pay the loss assessment to the HOA? Our insurance policy will cover the cost of that assessment. This is so important for people in an HOA to have, because it helps them during a natural disaster like a major hailstorm.
Question: Do all (HO 6) condo owners policies have loss assessment coverage?
Answer: No! Surprisingly, you’ll have to ask your agent about your specific policy to see if it does include that coverage. I’ve seen all kinds of policies in my thirty years in the business, and many of them do include it, but they only cover you up to $1,000. So if your assessment is $8,000 like I mentioned before, you’d still have to pay $7,000 out of pocket. Fortunately, with the policies I offer, I recommend people get at least $10,000 in loss assessment coverage to start. It’s even better to get more because it’s so cheap: you get $10,000 of coverage for only $7 per year, and to increase that to $25,000 of coverage, it only costs $12 more per year. So why wouldn’t you get more coverage? But again, if you already have a policy, ask your agent what it covers: you may be under-insured, and there are at least two insurance companies that don’t offer loss assessment coverage in their (HO 6) policies at all.
If you would like to find out more about how I can help you with your HOA insurance needs, contact me and my Colorado Springs staff will be happy to help you!