Condo Insurance

I live in a condo. What insurance do I need?

Living in a condo complicates insurance slightly. You'll be familiar with the general ownership structure, in which are responsible directly for what goes on inside your apartment, and the condo owners are responsible for the hallways, shared areas, and the overall fabric of the building. The division of responsibility is basically the same for a condo. You are responsible for insuring your own possessions, and the inside of your unit. The condo owner is responsible for insuring the building as a whole.

Cash value and replacement cost

In insuring your condo, you will likely need to choose whether to insure the cash value of your possessions and unit interior, or the replacement cost. You will have to make the same choice in most forms of insurance - but it is more crucial in condo insurance, because there is likely to be a greater difference betweent he cash value and the replacement cost.

A 'replacement cost' policy does what it says on the tin - it gives you enough money to replace what you own. This is the best for peace of mind, because it will (in theory) let you refurbish a similar condo in the same style as you had before. The downside is that it tends to be the more expensive option.

The cheaper choice is 'cash value'. Under this policy, the insurer will pay you what they calculate your property is worth when it gets destroyed. If you have old possessions they will be worth a lot less than the cost of buying them new, and so a cash value policy will pay you a lot less. This naturally makes the policy cheaper, but it also brings the risk of a nasty shock when disaster strikes, and you realise how little your insurer believes your belongings are worth.

How much cover

In condo insurance, as elsewhere, you get what you pay for. It's worth taking some time to think through what level of condo insurance you really need, so that you get the cover you need and don't end up paying for benefits you'll never want.

Do you have a lot of valuables in your home? In that case, you'll probably want to take out extra cover within your condo insurance. Remember that 'valuables' doesn't just meanthe stereotypical strings of pearls. A music buff's CD collection could easily be worth thousands of dollars, and you should make sure you have cover for it. Even if you think something is covered by your policy, get an explicit statement of this if at all possible, and make sure your insurer is aware of the contents of your condo.

What can go wrong?

When you read the start of the article, you might well have doubted that things are as simple as I laid out up there. And you'd be right. The division of responsibility between you and the condo owner is anything but clear-cut, and is typically the subject of legal wrangling.

Think about a typical case: water leaks through a roof, and damages the interior of your unit. Now, if the problem arises in the shared areas, such as the roof, then the owner of the building is responsible for it, and they should pay for damage it has caused. But it might not have caused such damage if you hadn't left a priceless painting uncovered underneath a leaky roof in winter - an argument which the owner, or his insurer, is sure to use if they think it will help them avoiding paying.

Regrettably, there is no clear-cut way to avoid such disputes. The best you can hope for is to make your policy as obvious as possible, know what cover there is for shared parts of the building, and maintain good relationships with everyone involved so you will be able to resolve disputes amicably when they arise. You'll never be able to avoid disputes, but in this way you can make life in your condo just a little bit easier.

If you own it, snap it

You also need to take care to have evidence of what possessions you have in your condo. Photographs are a good way of doing this. It doesn't take long to go around your home and take snapshots of the entire place. Don't forget to store them somewhere other than your condo, of course: they won't be much use if they're destroyed along with everything else! A system that has worked for many peopole is to put together a stack of documents including the condo insurance policy, evidence of possessions, and other personal documents, and to leave it with their parents. Doing this makes it much easier to regroup and get back on top of the world after damage to or destruction of your condo.