After Boulder and the front range had significant insurance claims from the recent floods, we thought this article, shared originally by 8zmortgage.com, was very insightful. If you are a condo owner, whether it be for your primary residence or as income property we recommend you to read this, and ask your insurance agent, or Garrett White, the Nationwide agent who wrote the original article how a unit owner’s policy minimize any gaps in insurance coverage for your property.
As our property market recovers and the metro Denver Area market rebounds, we have seen a paradigm shift in new purchases from homes to Condominiums with a 9.73% sales increase year over year, placing Denver in the top 10 condo markets in the United States. Nationally these sales surpassed 600,000 with a median price of $171,000. With this growth requirements for insurance have changed for new mortgages on these condos. The requirement now is to not only list the condo association’s master policy as an insured interest, but also a “unit owner’s” policy, HO6 (“walls-in as we will be telling our mutual clients), to show them as an interest as well.
What does this mean for the buyer?
On top of higher HOA fee’s for the “master policy”, which is provided by the association and covers the common areas and external physical structure (roof, basement, elevators, boiler and common areas/walkways) for both liability and physical damage, the HO6 policy will cover all items internally from the drywall in (additions, alterations, and personal possessions). Prior to closing it is imperative to get a copy of the master policy declarations to understand the scope of coverage it provides for the potential buyer, and work with an insurance professional to determine the adequate protection for the unit itself minimizing gaps in coverage. Most common master policies only cover from the studs out.
Another great feature inside an HO6 policy is Loss Assessment coverage. This coverage is built in to cover HOA assessments from common losses to the entire unit or updates to the premise where all owners would be assessed. This is an excellent feature to protect against large assessments like a new roof. As an example, Nationwide offers up to $50,000 in loss assessment coverage with a $1000 deductible. As well, if the condo being purchased is an investment, lenders will typically also require a minimum of 6 month’s of rent-loss insurance, which covers lost rent due to an insurable event.
All condos and clients are different and their HO6 needs need to be evaluated individually.