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Why do Condo Owners Need Insurance?

Created on: Monday Jul 11, 2016

If you own a condominium or townhouse, you may think that you don’t need insurance. After all, you pay condo fees which part of go towards the condominiums master policy, right? Think again. A condo’s master policy covers the building, common areas of the building, and your standard unit. What the master policy doesn’t cover is your personal belongings, any upgrades you have made to the unit, your personal liability, or any shortcomings to the policy itself.

Your Personal Property

There are 2 common types of coverage available for your personal property. Cash value coverage is the basic coverage, it replaces the original value of the property minus any depreciation. Replacement cost coverage comes with a slightly higher monthly premium, but it covers your property for its full price. For example, if your TV was stolen it would be replaced with a new TV of the same value today. Some companies even allow you to choose a cash option for your damaged or lost belongings, which you can use for anything you please.

Upgrades Made to Your Unit

Condominium corporations allow the owners to make improvements and minor alterations to their units such as installing new cabinets, flooring, upgrading appliances, etc. The problem is that the condo’s master policy only covers the unit as it was sold by the builder, so any improvements you or a previous owner made are not covered. Condo insurance policies can help fill this gap, especially


As a unit owner you are exposed to liability for injuring somebody or damaging other’s property. If a visitor is injured inside your unit you could be liable for their medical expenses, lawsuit costs, and other compensation. Or, imagine that when you weren’t home your washing machine began leaking and caused damage to the unit beside you or below you. In this case you would be liable for the damages, not the master policy. Having a condo policy can protect you from having to pay out of your pocket for any damage you might cause to other people or property.

Shortfalls in the Condo’s Master Policy

The part of your condo policy that covers shortfalls in the master policy is called contingent insurance. There may be damage to a common area in the condo, but the master policy either doesn’t have coverage for the type of claim, or the amount of coverage is insufficient. In this case the amount of outstanding damage is split among all the condo unit owners. Condo master policies can have very high deductibles, sometimes up to $50,000. If a claim is made, the deductible may be split amongst the unit owners. Contingent liability coverage protects the owner against these unforeseen events.

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