What To Look For in an H06 Policy
You've made the decision to purchase a condominium, you've looked at numerous properties, you've made an offer that was accepted - congratulations! Now you go to your mortgage company to get a loan, and they ask you if you have found an H06 policy, or condo policy. How do you make an informed decision about what to buy? Let's talk about what to look for in a condo policy.
The first thing to do is determine how much coverage you need. Unlike a homeowners policy, or H03 policy, condominium associations will have a master policy to cover the exterior building and common areas, such as the outside walls and sidewalks. The H06 policy needs to be written to cover the other areas the new homeowner is actually responsible for such as interior walls, flooring, and built in appliances. Get a copy of the master policy and see what is included and what you will need to insure.
Second, take an inventory of your movable belongings, called personal property. Add up the cost of these items and put together an estimate of how expensive it would be to replace them.
Next, determine how much liability coverage you will feel comfortable with. The liability portion of the H06 policy pays for legal expenses and judgments in the event you are sued for covered losses. A rule of thumb is to add up the equity in your home, the amount of savings you have, and 5 - 7 years income. $100,000 is the norm, but in these days of higher and higher damage awards, it is better to have too much than not enough.
Once you have these numbers, it's time to find a reputable insurance company that sells the H06 policy. First, go to an online quote site and have them compare insurance companies for you. Keep in mind that the lowest premium is not always the best choice. Make sure you are working with a financially stable company. This is found out easily by going to the insurance company's website and getting their financial rating done by a third party source, such as A.M. Best or Moody's. These ratings are shown by the letters A through F, with the A being the best.
If you have a company that you are comfortable with already, now is the time to take those quotes to your local agent and ask for a competitive quote. Tell him or her that you want an "apples to apples" comparison in order to get the best deal. In this manner, you know you will have done everything possible to save money.
Getting an H06 policy correctly can take a little time and legwork. However, it is better to do your homework up front and know you are properly insured than to have a insurance claim and find out too late you did not have enough coverage.
