Real Estate Home Insurance

What’s the Difference? Condo Insurance vs. Homeowners Insurance

Both homeowners insurance and condo insurance help protect the home’s owner from financial losses after a covered loss. Find out how the two are similar and how they differ in this comparison of condo insurance vs. homeowners insurance.
Tara Seboldt Avatar
condo insurance vs homeowners insurance

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Securing insurance is an important part of buying a home. Home insurance provides financial protection to homeowners in the event of a covered loss, such as a house fire or an injury to a guest. Mortgage companies typically require homeowners with a home loan to purchase and maintain an insurance policy to help protect the mortgage lender’s investment. For most people, budgeting for insurance coverage is just one of the unavoidable costs of owning a condo or a house.

With that being said, even condo owners need to protect their investment, though the coverage may look slightly different for them than for single-family homeowners. They’ll still need coverage, but instead they’ll purchase one of the best condo insurance policies in place of a traditional homeowners insurance policy. Many prospective condo owners find it helpful to go over the differences between condo insurance vs. homeowners insurance before buying a policy.

1. Homes are usually covered with an HO-3 or HO-5 homeowners insurance policy, whereas co-op and condo owners will need to purchase an HO-6 condo insurance policy.

There are eight types of homeowners insurance policies, ranging from HO-1 to HO-8. These different types of home insurance include coverage for single-family homes, condos, mobile homes, and coverage for renters. Another ninth type of homeowners insurance, a landlord insurance policy, helps protect landlords financially if their rental property sustains damage from a covered event. Property owners will want to compare landlord insurance vs. homeowners insurance to determine which type of coverage is appropriate for their situation.

Owners of single-family homes generally choose an HO-3 or HO-5 as their base policy. HO-3 policies tend to be slightly less expensive than HO-5 policies, but homeowners will receive better coverage with an HO-5 policy. Owners of older, historic, or otherwise high-risk homes may find their only option for obtaining homeowners insurance coverage is to purchase an HO-8 policy, which only covers against a handful of specifically named perils.

While those who own single-family homes have a few base insurance policies to choose from, condo owners typically do not. Condo or co-op insurance policies are known as HO-6 policies, and they offer unique protection for condo owners or apartment co-op members.

2. Homeowners insurance covers the entire home, while condo insurance protects the inside of the unit.

The main difference customers will note when comparing condo insurance vs. homeowners insurance is the different coverage the two types of policies offer. Homeowners insurance, for example, covers the entire dwelling, whereas a condo insurance policy protects the inside of an owner’s unit.

condo insurance vs homeowners insurance

Homeowners own not only the house itself, but also the land on which it sits and any exterior buildings or structures on the property. They need coverage to protect the home and any other structures from a list of perils, but they also need liability coverage to protect themselves. This coverage comes into play in the event a guest is injured inside their home or a family member accidentally injures someone or causes property damage away from the insured property.

A condo owner, on the other hand, doesn’t own their condo building in the same way a homeowner owns their house. They’re typically only responsible for insuring their individual unit. In most cases, an insurance company will consider the interior of individual condo units to be covered dwellings, and therefore covered under a condo policy, which provides coverage for the interior of the unit, personal liability coverage, and additional living expenses coverage should the condo be uninhabitable after a covered loss.

3. While a homeowners insurance policy covers damage to both the interior and exterior of the home following a covered event, the exterior of a condo is covered by the condo association’s insurance policy.

Dwelling coverage is the section of a home insurance policy that protects the physical structure of the home. A policy from one of the best homeowners insurance companies (consider companies such as Allstate and Lemonade) helps protect a home’s entire building structure from covered property damage, such as fire or storm damage. If a windstorm causes roof damage to a house, for example, homeowners insurance will cover roof leaks in some cases; for example, if a storm causes roof damage to a home and water gets inside the house, the insurance policy may provide coverage up to the dwelling coverage limits (less the deductible)

Unlike owners of single-family homes, condo owners don’t have sole financial responsibility for exterior damage or damage to common spaces of their condo buildings, which is often seen as a benefit when considering pros and cons of buying a condo. Instead, the entire building of a condo complex is generally protected by a master insurance policy. The homeowners association or condo association is in charge of managing the master policy. For example, if the wind from a storm damages the roof of the condo building, the master insurance policy generally covers the damage. Condo owners share the cost of the master policy through their condo association fees, which might surprise some condo owners.

Though homeowners insurance and condo insurance cover different types of dwellings, the coverage itself is often very similar. For instance, both condo insurance and homeowners insurance will often cover water damage when it’s sudden and accidental, such as when a pipe bursts. Both types of policies generally exclude coverage for floods or earthquake damage, though both condo owners and homeowners can often purchase separate coverage for these events.

4. Both homeowners insurance and condo insurance provide personal property coverage to help repair or replace belongings damaged by a covered event.

Personal property protection is one feature of both condo and homeowners insurance that is almost identical. Personal property refers to the owner’s personal belongings, such as furniture, electronics, and clothing. If a covered loss causes damage to the owner’s belongings, personal property coverage kicks in to help repair or replace lost or damaged items.

condo insurance vs homeowners insurance

Homeowners and condo owners can generally choose their personal property limits, or the maximum amount their home insurance company will pay to replace lost or damaged items. Both types of dwelling owners will also have a deductible, which is the amount they are responsible for paying out of pocket before their insurance kicks in. Typically, choosing higher coverage limits increases the cost of homeowners insurance, while lower coverage limits decrease the cost. On the other hand, higher deductibles can lower homeowners insurance or condo insurance costs, while lower deductibles usually increase rates. Condo owners might also want to consider one of the best home warranties for condos, such as one from American Home Shield or Select Home Warranty, to help cover major appliances and certain home systems. It’s important for condo owners to understand that a home warranty will not replace condo insurance; instead, a home warranty is a service contract that policyholders can use to pay for repairs to covered appliances and home systems.

Homeowners and condo owners may also want to note that some types of personal belongings may have individual coverage limits. Items such as fine art, jewelry collections, electronics, musical instruments, and sports equipment, for example, may have specific coverage limits. However, policyholders are often able to purchase coverage for specific high-value items. It’s recommended that policyholders carefully consider how much homeowners insurance they need to determine whether they need to add more coverage for expensive items, since adding extra coverage can raise the cost of homeowners insurance or condo insurance.

5. Both homeowners and condo insurance can provide liability coverage for incidents that occur on or off the property, though condo owners will also have some amount of protection from the condo’s master insurance plan.

Liability insurance is an important feature of a home insurance policy. Liability protection helps cover the cost of damages if a homeowner is found liable for accidental injuries that happen on or off the property. Coverage extends to include both accidental property damage and bodily injury to others. Additionally, liability coverage can help cover the costs for homeowners to defend themselves against lawsuits or personal injury claims against them.

condo insurance vs homeowners insurance

Both homeowners insurance and condo insurance include liability coverage both on-site and away from the owner’s home. It can include coverage for situations such as if the owner’s dog bites someone or if a child hits a ball through a neighbor’s window. In these instances, both condo insurance and homeowners insurance would pay to cover the medical bills or the cost to replace the broken window.

Where condo insurance differs from homeowners insurance relates to the condo association’s insurance plan. The condo’s master insurance plan handles general liability coverage for the association (in the event a guest is injured in common areas) and provides property damage coverage for certain shared areas of the property, such as a fitness center, swimming pool, roof, or common hallways.

6. Condo insurance will usually include loss assessment coverage, and loss assessment coverage is an optional coverage homeowners can add to their policies.

Loss assessments refer to the process of calculating the cost of damages to common areas in a community. Homeowners and condo associations use loss assessment to determine how much to charge each owner for repairing or replacing shared amenities, such as a roof replacement that exceeds the policy limits. Homeowners association and condo association insurance policies generally include some amount of loss assessment coverage. Loss assessment coverage helps pay for the expense of these shared repairs or costs.

However, the master insurance policy doesn’t always have enough coverage to pay for the total cost. If there isn’t enough insurance coverage to pay for damages, the homeowners association will divide the total remaining cost among the homeowners. Condo owners and homeowners with an HOA can add their own loss assessment coverage to their individual insurance policies to help bridge the gaps in coverage.

For example, a storm severely damages the stairwell of a condo complex. The cost to repair the damage is $200,000, but the condo’s insurance policy only covers $175,000. The condo association splits the remaining $25,000 of repair costs among the condo owners. If a condo owner has loss assessment coverage, their insurance may cover their portion of the repairs.

7. Homeowners insurance loss of use coverage is typically based on a percentage of the dwelling coverage, whereas condo insurance loss of use coverage may be based either on a percentage of the dwelling coverage or the personal property coverage.

Loss of use or additional living expenses coverage helps homeowners and condo owners cover their extra costs of living if a covered loss makes their home temporarily uninhabitable. For example, if a kitchen fire causes smoke damage, the homeowner may have to live elsewhere during the time it takes to mitigate the damage. It’s possible the homeowner may have to stay in a hotel and drive an extra half hour to work. Their homeowners or condo insurance will generally cover their increased cost of living, such as the difference between their monthly mortgage payment and the cost of staying in the hotel.

condo insurance vs homeowners insurance

With homeowners insurance, the home’s dwelling coverage limits are used to determine additional living expenses coverage. For instance, a house has a dwelling coverage limit of $300,000 and a loss of use coverage limit of 10 percent of the dwelling limit. The homeowner could potentially claim up to $30,000 in additional living expenses. On the other hand, loss of use coverage for a condo insurance policy might be calculated using a portion of the dwelling coverage limit or the policy’s personal property coverage limits.

Homeowners and condo owners may want to talk with an insurance broker to learn more about loss of use coverage and when it applies. An insurance broker or agent can also help the owner get a better idea of how much insurance coverage they need to best protect their investment.