The Difference Between an Individual Condo Insurance Policy and a Master Insurance Policy

What is an Individual Condo Insurance Policy?

Your individual condo insurance policy, or a unit owner’s policy, is the insurance policy that you are responsible for as the owner of a condominium unit. This is essential because this policy protects your personal belongings and offers liability protection in case of an accident within the walls of your unit. In many cases, your mortgage lender or condo association will also require you to have your own condo insurance policy. Your individual unit owner’s policy is similar to homeowners coverage in that it provides:

• Personal Liability Coverage — Coverage that protects you in the event that others make a claim or bring a suit against you for physical injuries, bodily injury or property damage for which you are responsible.

• Personal Property Coverage — This coverage may help to repair or replace your personal belongings, such as electronics or furniture, in the event that they are stolen or damaged in a covered claim.

Depending on the specifics of your policy, it may also include Loss of Use Coverage, which applies if you temporarily have to live somewhere else if your condo is uninhabitable due to a fire or other covered loss. This additional living expense coverage can help cover expenses above and beyond your average monthly expenditures like rent for another apartment, hotel bills, meals, laundry and other expenses incurred due to the displacement. As a condominium owner, you are in a unique situation where you own part of a building or property, but not all of it. For this reason, two insurance policies are needed to make sure everything is protected. Your individual unit owner’s policy is only one piece of the puzzle when it comes to insuring a condominium. The other piece is what your condo association must provide and that is known as the Master Condo Policy.

What is a Master Condo Insurance Policy?

The Master Condo Policy or Condo Association Insurance is the insurance policy that is held by the homeowners or condominium association. Its premium comes out of your maintenance fees or association dues. The Master Condo Policy is responsible for covering two main areas of risk — general liability for the association and property damage coverage for common areas. Common areas are generally defined as the roof and exterior walls, stairways, recreation rooms, elevators, common hallways, and grounds.

For example, coverage can be limited to the structure of the building and common areas or include all structures, including counters, floors and cabinetry within your individual unit. Understanding the type of coverage your condominium association’s master policy provides is something you will want to figure out before you buy your unit as this is an important part of finding the proper individual coverage you need as a condominium unit owner.