When you purchase a new condo with a mortgage, your lender will typically require you to present proof of insurance coverage that complies with their guidelines. Their loan is secured by your condo, and any damage to the condo reduces the value of the collateral until the damage is repaired. With this in mind, it makes sense that a mortgage lender would require you to purchase insurance to ensure that you have funds available to repair or replace the collateral as needed. Because you may experience extreme financial loss if your condo is damaged, it makes sense to set up coverage on your condo even if you do not have a mortgage lender requirement to meet.
There are several types of coverage included in a typical condo insurance policy. The first type is property coverage, which pays for repairs or replacements for the condo itself. Remember that condo owners only own the interior portion of their unit. The exterior portion is owned by the owners’ association in most cases. The second type of coverage is personal property insurance. This type of coverage only provides benefits related to losses to the interior contents of the condo. Examples of these items are your clothing, appliances, electronics and furniture. Another coverage type that is usually included with condo insurance is liability coverage. When other people are injured on your property, you may be financially liable for related expenses. This is commonly medical expenses, but it could also include other expenses. Liability insurance provides benefits related to these expenses.
When you purchase your policy, you may be able to buy optional coverages as well. For example, perils like earthquakes, flooding and mold are not usually covered in a standard policy and must be requested separately. You can choose to add these optional coverages, and you can also choose your coverage limits. Another factor that you have control over is the deductible on your policy. Each of these components impacts your premium amount as well as your potential out-of-pocket cost if you need to file a claim. Make a thoughtful, informed decision when setting up coverage so that you can protect yourself against potential losses.