Getting the right insurance for your home is essential. If you live in a townhouse, you may be wondering whether you need condo insurance or homeowners insurance – or something else. The answer will depend on your exact situation.
Insurance Coverage for Townhouses
A townhouse – a house that shares a roof, a foundation and possibly a wall with other houses – seems to fall somewhere between a single-family detached home and a condo.
Insurers do not typically offer insurance coverage designed specifically for townhouses. Therefore, you will need to purchase either a homeowners insurance policy or a condo insurance policy. Which one is better suited to you depends on your situation.
The Difference Between Condo and Homeowners Insurance
With a single-family detached house, the homeowner owns the building, the foundation and the yard. With a condo, the condo owner usually owns the unit, but not the common grounds or exterior of the building, which are typically managed by a condo association. As a result of these differences, different types of insurance policies are needed.
- Homeowners insurance typically covers the house as well as other structures and the yard. A standard policy will also provide personal property coverage, liability coverage and additional living expenses coverage.
- Condo insurance typically covers the property owned by the unit owner, but not the common grounds or building exterior owned by the condo association. As with homeowners insurance, a standard condo insurance policy will also provide personal property coverage, liability coverage and additional living expenses coverage.
Condo Associations and Townhouse Insurance
When deciding whether you need condo insurance or homeowners insurance for your townhouse, one of the key issues is whether your townhouse is part of a condo association.
- If your townhouse is part of a condo association, you will typically need a condo insurance policy.
- If your townhouse is not part of a condo association, you will typically need a homeowners insurance policy.
Condo Association’s Master Insurance Policy
In a condo, the condo association should have its own condo association’s master insurance policy. This may be bare walls coverage that excludes the property that is part of the individual units.
It is still very important for condo owners to purchase their own policy to protect any of their own property not covered by the condo association’s master insurance policy, as well as their personal belongings. Condo owners will often be required to maintain coverage under the terms of the condo association.
When purchasing condo insurance, it is important to understand what is covered under the condo association’s master policy versus the individual condo insurance policy, as the details and coverage needs may vary depending on how the condo association handles insurance.
Owning vs. Renting and Personal Property Coverage
Another key issue is whether you own or rent your townhouse.
When a home is rented, both the property owner and the renter need insurance.
- Property owners need insurance that includes dwelling coverage for the building itself. For example, if a fire destroys or damages the building, the property owner’s insurance should provide coverage.
- Renters need insurance to protect their personal property. For example, if the renter’s personal belongings are stolen or damaged in a fire, the property owner’s insurance will not typically cover this, but the renter’s policy will. Renters insurance can also provide additional coverages, including liability coverage.
If you rent your townhouse, you should purchase renter’s insurance to protect your personal belongings and to provide liability coverage. In many cases, your lease will require renter’s insurance coverage.
If you own your townhouse, you will need either condo insurance or homeowners insurance, as discussed above.
Insurance Policy Limits, Deductibles and Premiums
Regardless of the type of insurance policy you own, it’s important to understand the policy, including the limits, deductibles and premiums.
When you insure your townhouse, you should make sure the policy limits are sufficient. Consider both the policy limit for the townhouse itself as well as the policy limits for liability and personal property coverage.
If the value of your home increases, you may need to increase your limits. This may happen because of changing property values in your area or because of home improvements you carry out. (You should contact your insurer before starting major home improvements.)
If you think you need more liability coverage, you might want to consider an umbrella insurance policy. An umbrella insurance policy provides additional coverage if the liability limits of your other policies, such as homeowners and auto insurance, are exceeded.
The deductible is the amount you will have to pay out-of-pocket if there is a loss. A policy with a higher deductible might have a lower monthly premium, but it’s important to make sure you will be able to afford your deductible in case you experience a claim.
Insurance Policy Exclusions
It’s also important to look at the exclusions in your policy. Certain losses are covered in standard policies, and these may include theft, fire, wind and hail damage. However, other losses are excluded in standard policies. Flood coverage, for example, is not typically included and must be purchased separately. Earthquake damage is also typically excluded, and if you live in an earthquake-prone area, you may need to purchase a separate policy.
Certain types of property, such as vehicles, may be excluded from the personal property coverage. Items of very high value, such as fine art and jewelry, may need to be listed separately.
The liability coverage will also come with exclusions. For example, a standard policy might provide coverage for a guest who is injured on your property, but not for a member of the household who is injured. In another common example, dog bites are often covered, but certain breeds of dogs may be excluded.
Read your policy carefully. If you have any questions about your coverage, ask your insurance broker for clarification.
The Right Coverage for Your Townhouse
Insurance can be a complicated subject. In addition to figuring out whether you need condo insurance, homeowners insurance or possibly renters insurance, there are many other issues to consider. Different insurance companies may provide different coverage options, and the rates may also vary significantly.
A Higginbotham insurance broker can help you find the right policy for your townhouse, as well as any supplemental insurance policies that you may need. Contact us for guidance.