H06 Insurance Policy or Condo Master Policy - What's the Difference?
If you are thinking about buying a condominium, you might have questions about who insures what. In a typical condominium, there might be many separate housing units owned by separate owners, and dealing with insurance issues can be complicated. Let's take a look at the insurance policies that are used for condominiums - the H06 insurance policy and the condominium master policy.
A condominium consists of individual family or business unit housed in a common structure. There are also sidewalks, landscaping, and other elements, called common areas that are for the use of everyone. The building itself consisting of the roof, exterior side walls, entrances, frame, and the common areas previously mentioned are insured with a condominium master policy, purchased by the condominium homeowners association.
Each homeowner in the condominium is responsible for insuring everything else associated with his or her own unit. Furniture, fixtures, appliances, floor covering, and any personal possessions should be insured with the H06 insurance policy. An easy way to think of it is the homeowner is responsible for insuring everything from the studs in the walls in.
With two policies like this, sometimes there can be confusion over which insurance company is responsible for paying claims. A general rule of thumb is that a loss created by a common element that does damage to an individual unit should be covered by the master policy. For example, if the roof leaks and causes damage to the ceiling in an individual unit, the master policy should generally pay for the repairs.
Both policies will come with a limit of liability protection in the event of legal damages awarded to someone who sues a condo owner or the association itself. The condominium master policy usually will have a much higher limit of insurance due to the increased exposure of multiple tenants. It is not rare to have the master policy have a limit of liability coverage of $5 million plus.
It is a good idea to ask for a copy of the limits of insurance of the master policy, called the declarations page, to know and understand what coverages are in place. This will enable you to purchase an H06 insurance policy and equip it to provide for any gaps in coverage the master policy may have.
If you are going to purchase a condominium, the mortgage company or bank will ask you for a copy of your H06 insurance policy to prove you have insurance. They will need a copy of the declarations page of the condominium master policy also to show that there is adequate coverage for the common areas in the event of a disaster.
Owning a condominium can be convenient and for the most part maintenance free. Make sure you have the right insurance in place to protect your most valuable asset.
