Condos are great places to live. Life becomes simple. No lawns to cut, power outages are rare, and snow removal reliable and fast (excluding snowmageddon, of course).

But what happens when the snow leaks into your condo unit or a power outage causes an electrical spark? What is the condo association responsible for, and what is the financial responsibility of the unit owner? It can be a bit confusing.

Let’s sort it out.

In Maryland and the District of Columbia, your condominium associations are required to purchase insurance, known as “Master Policies”. These Master policies cover the condominium structure of all the units in the building, as well as the common areas as installed by the developer. There are two types of coverage here: casualty and liability.

Casualty insurance covers real property damage due to an accidental event. This could be water damage from burst pipes, fire damage, etc.

Liability insurance covers property damage or bodily injury to a third party due to the negligence or carelessness of the condominium association (for example, slip and fall, cracked sidewalks, etc.).

While these Master Policies are in place to cover the above damages, unit owners still have financial responsibilities for certain damages as well. Master Policies never cover everything.

What is not covered by Master Policies?

  1. Damage to the “improvements and betterments” you have installed in your unit. These are permanent additions, or changes, made to your unit at your own expense. Examples include changing any original items installed by the builder: replacing tile floors with wood floors, Formica countertops with granite, builder grade faucets with designer fixtures, etc. Pretty much any upgrades to the original materials used by the builder. And, yes, at some point you will be replacing and upgrading fixtures as they wear out. Remember, you will be financially responsible for damages to any improvements once you make changes (also known as improvements and betterments).
  2. Personal Property. Master policies do not typically cover furniture, appliances, clothing, jewelry, artwork, etc.
  3. The Master Policy deductible. Under Maryland law the Master Policy deductible is limited to $5,000 or $10,000. This means that if the cause of the damage originates in your unit, you will be responsible for paying the cost of the repairs up to the deductible amount ($5,000 or $10,000). That can be a significant and unexpected outlay of funds.

What options do Condo Unit Owners have? HO-6 insurance.

HO-6 insurance is designed to address the financial obligations of the unit owners outlined above. All condo unit owners should individually purchase an HO-6 policy. It just makes good common sense.

Remember, the Master Policy does not cover everything.

These HO-6 policies are designed to cover the Master policy deductible, the water damage to your furniture, TV, theft, betterments (anything that was not originally installed by the builder), alternate lodging if you need to move out during repairs, etc. The costs of most of these policies is nominal considering the protection and peace of mind they provide.

It is always a good idea to review your condominium association’s Master Policy, which is available upon request. In it you will find a wealth of information about what is covered and what is not. But, you will still need an HO-6 policy. By the way, some states are now requiring unit owners to purchase HO-6 policies. Maryland has not yet done so, but it is now a requirement in the District of Columbia.

Remember this: when purchasing an insurance policy (like HO-6) make sure you understand what the policy will cover and what it will not. Your agent can help assist you with this.

Finally, should you have questions or concerns about this discussion or the insurance coverage discussed above, consult with an attorney familiar with this area of the law.

Thanks for checking in,