What Is Condo (HO6) Insurance?

If you own a condo, your association’s master policy covers the building’s exterior and shared spaces, but it does not protect your personal property or the interior finishes of your unit. That gap is what an HO6 policy fills.

Most mortgage lenders require an HO6 policy before they will close on a condo loan, and Fannie Mae now specifically mandates coverage from the studs inward unless the master policy already handles that. Even if you own your condo outright and nobody is forcing you to buy it, carrying an HO6 is one of those things I would not skip. A kitchen fire or burst pipe could easily run into five figures, and that bill lands on you without coverage.

What Is Condominium Insurance?

Condominium insurance is a type of homeowners insurance that provides financial protection for a policyholder’s condominium against various perils, such as fire, weather damage, vandalism, smoke, and explosions. It only covers the individual unit and does not extend to common areas like hallways, staircases, or elevators.

The condo association’s master policy plays a significant role in determining the minimum coverage a condo owner should purchase. Some master policies only cover common areas and the building’s exterior, while others may extend to certain items within individual units, excluding personal property.

The appropriate amount of coverage depends on factors like the risk level in your area (flood coverage may not be necessary in an arid region), the value of your personal property, and any improvements you have made to the unit’s interior. A condo owner in downtown Miami faces a very different risk profile than someone in a Boise suburb, and premiums reflect that.

What Does Form No. 6 Condominium Unit Owner’s Form Mean?

Form No. 6 (HO-6) is a type of homeowners insurance policy designed to provide coverage for the personal property of condominium unit owners or shareholders in a cooperative building. This policy may include coverage for items not covered by the condominium association’s insurance, as well as liability coverage and medical payments coverage.

“Dominium” is a Latin word (modern spelling: “dominion”) that means right of ownership. “Con” means together with. And so we get the term “condominium,” or “condo” for short, denoting a system of ownership in which owners have full title to an individual apartment or town house, and an undivided interest in shared parts of the property (undivided meaning, in this case, that the ownership is shared and cannot be divided into parts).

While condominium insurance shares some DNA with homeowner’s or renter’s insurance, there are consequential differences. The biggest one is that you are splitting structural responsibility with every other owner in the building through the master policy. That split changes what you need to buy individually and how much of it you actually need.

What Does Condo (HO6) Insurance Cover?

The individual policy you will purchase is commonly known in the industry as an HO-6 policy. Although similar to an HO-3, HO-6 does not provide as much coverage for real property, as it is intended to work in conjunction with the master policy of the condominium association. In addition to personal property, HO-6 generally provides coverage for the following:

• Personal property: furniture, electronics, clothing, books, and other belongings inside your unit.
• Personal liability: typically covers everything from slip-and-fall accidents on your property and libel or slander to a rock thrown by your ten-year-old. Standard limits start at $100,000, though I would recommend at least $300,000.
• Loss of use: pays for temporary housing and additional living expenses if your unit becomes uninhabitable after a covered event.
• Improvements and alterations: built-in cabinets, appliances, interior dividers, or bookshelves that you have added or upgraded.
• Common areas: a portion of the hallway, sidewalk, or entrance.
• Real property exclusively belonging to the unit owner: items such as upgraded doors and locks.
• Structures off the premises: a garage or shed owned by the insured that is located in another part of the building.

As with homeowner’s and renter’s policies, you need to discuss your individual needs with your broker or agent. Be sure to include matters such as high-value items like jewelry or art, and special subjects such as flood coverage.

A good general approach to evaluating HO6 policies is to start by asking what it covers with respect to personal property. With a homeowner’s policy the first consideration is usually coverage of the structure. But when it comes to condos, the master policy covers the structure, so the purpose of an HO6 policy is first and foremost to cover what you own within the structure, along with liability coverage.

Among other things, be sure to understand whether coverage is actual cash value or replacement cost. Actual cash value policies are cheaper because you are covered only for what an item would cost today less depreciation for how old it is. With replacement cost policies you get the actual price you pay to replace the item. According to the National Association of Insurance Commissioners (NAIC), a replacement cost policy typically adds only 10% to 15% to your premium, which I think is money well spent.

How Much Does Condo Insurance Cost?

On average, a condo insurance policy costs $663 annually. However, your premium can vary based on several factors, such as where you live, your claims history, fire safety measures, credit score, chosen coverage options, deductibles, and the condition of your condo.

The gap between the cheapest and most expensive states is significant. Wisconsin averages just $272 per year, while Florida comes in at $1,069. That is nearly a $800 difference driven mostly by hurricane exposure and the litigation environment around insurance claims in Florida.

Your deductible choice has a direct impact on what you pay monthly. Raising your deductible from $500 to $1,000 can lower your premium by 10% to 15% in many cases, but you need to be comfortable covering that higher amount out of pocket if something happens. I generally tell people to set the deductible at whatever amount they could pay within 30 days without borrowing money.

Credit score also plays a bigger role than most people expect. In most states, insurers use credit-based insurance scores as a rating factor. A poor credit score can increase your premium by 50% or more compared to someone with excellent credit, even if every other factor is identical. Hawaii, California, Maryland, and Massachusetts are among the states that restrict or ban this practice.

The Master Policy

The individual owners of properties that make up a condominium complex have a collective responsibility to insure common areas, so the condo association purchases an insurance policy known as the master policy. Funds to pay for this policy come out of dues paid by all unit (apartment or town house) owners within the complex.

As a unit owner or potential unit owner, the first thing you need to do to understand your insurance needs is to obtain a copy of the master policy for the complex, along with the association rules. These documents should absolutely be provided to you if you are contemplating purchasing a unit in a complex. They spell out what parts of the complex are insured by the master policy and what parts are not.

Though there are countless variations, broadly speaking there are three types of master policies: “bare walls,” “walls-in,” and “all-in.”

Bare Walls Coverage

“Bare walls” policies cover all real property from the exterior framing inward, but not the fixtures and installations inside the unit. Note that “real property” refers to land and buildings, meaning structures themselves and not what is known as “personal property,” the things that are in the buildings.

In a bare walls policy, even things that can feel like they are part of the building, like the granite countertop you installed or fixtures like kitchen cabinets, are most likely not insured. Some policies will cover plumbing and wiring, but not all. Look over your policy carefully. This is the type that catches people off guard most often, because they assume their cabinets and flooring are covered when they are not.

All-In Coverage

“All-in” policies offer the broadest coverage and usually include items such as appliances (refrigerator, stove, hot water heater), wiring, plumbing, carpeting, countertops, lighting, and flooring. Under an all-in master policy, the association is responsible for insuring the inside and outside of the building and each unit back to its original condition. If you have made upgrades or improvements beyond the original build, those additions still fall on you to insure through your HO6 policy.

Before you and your insurance broker or agent can properly assess your personal condo insurance needs, you need to know what the master policy covers. The complex you own a unit in or are contemplating purchasing a unit in should provide you copies of the master policy and the association rules so that you can, in turn, purchase adequate insurance.

Fannie Mae and Freddie Mac now require that condo association master policies carry 100% replacement cost value, maintain deductibles no higher than 5% of the building’s insured value, and include adequate liability and fidelity coverage. These requirements exist because lenders want to make sure the building itself is protected, which in turn protects the value of each individual mortgage they hold on units within that building.

Deductibles Or Exclusions In The Master Policy

While a master policy tends to provide broad coverage, there will almost assuredly be at least a few deductibles and exclusions. Most HO-6 policies offer what is called “contingent insurance,” which provides coverage for shortfalls in the master policy.

If a liability arises in a common area of the condo complex and you are sent a bill (often called a “special assessment”) for your share of the loss due to a deductible or exclusion in the master policy, contingent insurance covers you. It is usually in the amount of 250% of the personal property limit in your HO-6 policy or $50,000, whichever is greater.

I have seen master policy deductibles as high as $50,000 or even $100,000 in hurricane-prone areas. When the association files a claim for roof damage after a storm, that deductible gets divided among all unit owners. If your building has 20 units and the deductible is $100,000, your share is $5,000. Without contingent coverage or loss assessment coverage on your HO6, that bill comes straight out of your pocket.

Loss Assessment Coverage

Loss assessment coverage is a piece of the HO6 policy that a lot of condo owners either overlook or do not fully understand. It protects you when your condo association issues a special assessment to cover damages to shared spaces that exceed the master policy’s limits or fall within its deductible.

Most basic HO6 policies include only $1,000 in loss assessment coverage. That amount is almost never enough. Assessments after major events like fires, storms, or water damage to common areas can easily run into five figures per unit owner. Increasing your loss assessment limit to $25,000 or $50,000 typically costs only $20 to $50 more per year, which makes it one of the cheapest upgrades you can add to your policy.

Do You Need HO6 Insurance?

In most cases, yes. If you have a mortgage on your condo, your lender almost certainly requires it. Fannie Mae’s guidelines specifically require borrowers to carry an HO6 policy covering personal property, personal liability, and the physical unit from the studs in, unless the lender can document that the association’s master policy already provides that interior unit coverage.

Even without a mortgage, I would not go without it. Your master policy does not cover your personal belongings or your liability if someone gets hurt inside your unit. A liability lawsuit alone could exceed $100,000 in legal costs and settlements. An HO6 policy running $30 to $55 a month is inexpensive relative to the exposure you carry without one.

Some condo associations also require unit owners to carry a minimum level of HO6 coverage as part of the association’s bylaws. Check your association rules before assuming it is optional.

How To Save On Condo Insurance

The single most effective step is comparing quotes from at least three or four carriers. Rates for the same coverage can vary by 30% or more between companies. State Farm, for example, averages around $441 per year nationally, while other major carriers price similar coverage above $600.

Beyond comparison shopping, there are a few things that reliably lower premiums:

• Bundle your policies. Carrying your condo and auto insurance with the same company often earns a 5% to 15% discount.
• Install safety devices. Smoke detectors, deadbolts, and monitored alarm systems can qualify you for small but consistent discounts.
• Raise your deductible. Moving from a $500 to a $1,000 deductible can cut your premium by 10% to 15%.
• Review your master policy. If the association’s master policy already covers certain interior items, you may be paying for overlapping coverage on your HO6 that you do not need.
• Maintain good credit. In most states, insurers use credit-based insurance scores. Paying down debt and keeping accounts in good standing can lower your rate over time.

One thing I would avoid is cutting your liability limits just to save a few dollars a month. Liability coverage is the cheapest part of the policy relative to what it protects you from. Going from $100,000 to $300,000 in liability coverage might cost you $20 more a year, and the difference in protection is enormous.

Find Condo Insurance In Your State

Condo insurance costs vary widely by state due to differences in natural disaster risk, local construction costs, state insurance regulations, and claims frequency.