Condo ownership is increasingly the first step on the real estate ladder. In cities around the world, the cost of a single-family home has become unreachable, and many are now buying condominiums as their starter home. Meanwhile, condos are also a popular way for retirees to downsize, invest in a rental property, or as a way for people to own a second home in another city.
If you’re considering condo ownership, you may have questions about insuring your new property. When it comes to coverage, there are some important differences in the process depending on whether you are making a home or condominium insurance claim.
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Who Pays to Repair the Structure?
When you own a single-family home, responsibility is pretty cut and dry. Unless someone else is responsible for the fire, like a neighbour or a contractor, your own home insurance policy is responsible for covering the costs of a loss.
When there’s a fire in a condo building, the Condo Owners Association’s insurance covers the repairs. Individual owners pay for this coverage through their condo maintenance fees, but it’s not their individual policy.
Condo owners still need their own insurance policies to cover personal belongings, as well as fixtures and appliances. The Owner’s Association insurance only covers common areas such as hallways, elevators, stairs, landscaping, and walls. You will also need your own policy to cover upgrades such as new light fixtures or countertops.
Contents and Additional Living Expenses
That leaves the other two major elements of a fire insurance claim: Contents and Additional Living Expenses (ALEs).
Contents insurance covers the cost of replacing items such as:
- Media (vinyl, books, DVDs, etc.)
- Wet and dry goods
Additional Living Expense covers the costs associated with living elsewhere while the repairs are made on your unit. This includes:
- Takeout costs
- Long-term rental
- Additional transportation or storage costs
Less Control, Longer Repair Times
Repairs on multi-unit buildings are complex and take more time than on a single-family home. You don’t have as much control over the process because you’re not the one dealing directly with the insurance company.
Importantly, this means that you could be out of your condo considerably longer than you would be displaced from your house. It will take the builders longer to repair the building, which means you could face much higher Additional Living Expenses than you would in a single-family home.
It’s important to consider how long you might be out of your home when you’re shopping for condo insurance.
With a single-family home, any legal action resulting from an injury taking place on your property would be covered by your liability insurance. In a condo, you depend on your personal condo insurance if a guest or contractor is injured inside your unit, while the Owners Association’s insurance would cover any injuries sustained in common areas such as the lobby or elevator.
Home and condo insurance are very similar, but it’s useful to know where they differ nevertheless.
You may also read: How to Prepare Your House for Selling?