What is an HO-6 Policy? A Guide to Condo Insurance

Owning a condominium offers a unique blend of homeownership and community living. You own your individual unit, but you also share ownership of common areas—like hallways, elevators, pools, and the building's exterior—with your neighbors. This shared ownership model is governed by a Homeowners Association (HOA), which maintains a "master insurance policy" to cover the building and common areas.

A common and dangerous misconception among new condo owners is that this HOA master policy covers everything. It does not. The master policy is designed to protect the collective interest of the association, but it leaves a massive coverage gap for the individual unit owner. Your personal belongings, the interior of your unit, and your personal liability are all your responsibility.

To fill this gap, you need a specialized type of insurance known as an HO-6 policy, or condo insurance. It is designed to work in tandem with your HOA's master policy, picking up where the master policy leaves off to provide a comprehensive shield for your property and your assets. Understanding what an HO-6 policy is and what it covers is a non-negotiable for any responsible condo owner.

The Two Policies: Your HO-6 and the HOA Master Policy

Think of condo insurance as a puzzle with two essential pieces:

1. The HOA Master Policy: This is the insurance purchased by your condo association, paid for by your HOA fees. It covers the physical structure of the building and the common areas. However, the extent of this coverage can vary dramatically.
2. Your HO-6 Policy: This is your personal insurance policy that covers everything the master policy does not.

The first step in purchasing the right HO-6 policy is to understand exactly what your HOA's master policy covers. You must obtain a copy of the master policy documents from your HOA board. There are generally two types:

• "All-In" (or "Single-Entity") Coverage: This is the more comprehensive type of master policy. It covers the building's exterior, common areas, and the fixtures within individual units as they were originally built (e.g., the original flooring, cabinets, and bathroom fixtures).
• "Bare-Walls" Coverage: This is a less comprehensive master policy. It covers the building from the drywall inwards, but nothing inside your unit. The flooring, cabinets, fixtures, and all improvements are your responsibility to insure.

Knowing which type of master policy your HOA has is critical for determining how much dwelling coverage you need on your personal HO-6 policy.

The Core Components of an HO-6 Condo Insurance Policy

An HO-6 policy is a package of several distinct coverages, similar to a standard homeowners policy but tailored for a condo owner's needs.

1. Dwelling Coverage (or "Building Property" Coverage)

This is the part of your HO-6 policy that protects the interior of your unit. This includes your walls, flooring, cabinets, countertops, bathroom fixtures, and any improvements or renovations you have made.

• If your HOA has a "bare-walls" master policy, you need enough dwelling coverage to rebuild the entire interior of your unit from the studs in.
• If your HOA has an "all-in" policy, you still need dwelling coverage to protect any upgrades or remodels you'vedone. If you replaced the standard laminate countertops with granite, for example, your HO-6 dwelling coverage would pay for that upgrade. You also need coverage for your personal share of the master policy deductible, which can be very high.

2. Personal Property Coverage

This is a cornerstone of your policy. It protects all of your personal belongings—your furniture, electronics, clothing, kitchenware, etc.—from perils like fire, theft, and vandalism. As with a standard homeowners policy, it's crucial to choose a coverage limit that is high enough to replace everything you own and to select Replacement Cost coverage rather than Actual Cash Value. Using a home inventory is the best way to determine your need.

3. Personal Liability Coverage

This is arguably the most important protection your HO-6 policy provides. It shields you from lawsuits if you are found legally responsible for injuring someone or damaging their property. If a guest slips and falls inside your unit, if your dog bites someone in the hallway, or if you accidentally cause a kitchen fire that damages neighboring units, this coverage pays for your legal defense and any settlement or judgment against you, up to your policy limit. Most experts recommend a minimum of $300,000 to $500,000 in liability coverage.

4. Additional Living Expenses (ALE) / Loss of Use

If a covered event, like a fire or major water leak, makes your condo uninhabitable, where will you live? ALE coverage is a financial lifeline that pays for the "additional" costs of living elsewhere while your unit is being repaired. This includes the cost of a hotel or temporary rental, laundry, and other necessary expenses.

5. Loss Assessment Coverage

This is a unique and vital coverage specific to condo insurance. As a member of the condo association, you are a part-owner of the common areas. If there is a major loss in a common area—for example, a fire destroys the clubhouse or a major liability lawsuit exceeds the HOA's master policy limit—the HOA can levy a "special assessment" against every unit owner to cover the shortfall.

Loss Assessment coverage is designed to reimburse you for your share of this assessment. For example, if a $500,000 lawsuit exceeds the HOA's $300,000 liability limit, the remaining $200,000 might be divided among the 100 unit owners, resulting in a surprise $2,000 bill for you. Your Loss Assessment coverage would pay this bill. Standard policies often include a small amount ($1,000 to $2,000), but it is highly recommended to purchase an endorsement to increase this limit significantly.

Is Condo Insurance Required?

While there may be no state law requiring you to have an HO-6 policy, your mortgage lender will absolutely require it to protect their financial interest in your unit. Furthermore, a growing number of HOA bylaws now contractually require all unit owners to maintain a personal HO-6 policy with a certain minimum level of liability coverage. But even if it weren't required, going without it would be an act of extreme financial negligence.

Conclusion

Living in a condo community requires a unique approach to insurance. Your HOA's master policy provides the first layer of protection, but it leaves you personally exposed. An HO-6 condo insurance policy is the essential second layer that protects your belongings, the interior of your unit, and, most importantly, your assets and future income from devastating liability claims. Before you buy, do your homework: read your HOA's master policy, calculate your needs, and work with a qualified agent to build an HO-6 policy that provides true peace of mind.