Co-op and Condo Unit Insurance: What’s Covered What You Should Know When Shopping for a Homeowner’s Policy

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In a scene from the 1985 historical drama Out of Africa, Lord Delamare (portrayed by Michael Gough) asks the Danish writer Isak Dinesen (played by Meryl Streep) if she had insurance after her coffee farm in Africa burnt to the ground. “That’s for pessimists,” she responds.

Truthfully, most of us don’t feel that way, and know better when it comes to insurance.  It is a necessary, if tedious, part of life, and we purchase many types to protect many things, from our cars to our health to our lives (or deaths). And of course, insurance is also significant for covering a residence.

What’s Required?

Most mortgage lenders will require the purchase of a homeowner’s policy upon the purchase with financing or the refinancing of a private home. In the case of multifamily dwellings, building insurance is a requirement as well. But what about a co-op or condo unit?

The answer is, nothing. “Generally bylaws don’t require owners to carry homeowner’s insurance -- but when a mortgage is taken, the mortgagee will,” confirms Alex Seaman, Senior Vice President of HUB International, an international insurance agency. While homeowner’s insurance may not be a requirement it is strongly recommended, even if you don’t have a mortgage.

Consider the following example: Your neighbor’s bathtub overflows and damages your bathroom. Neither of you have homeowner’s coverage.  What may well happen is that neighbor will be suing neighbor. The mess to the common areas inside the walls created by the flooding would have to be repaired as well--in this case by the building, probably requiring a claim through the building’s insurance that might raise premiums and then would be passed along to everyone.  There are no winners here.

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