While the homebuying process seems to never end, rest assured that you will reach the end eventually! One of the final steps before settling into your new home is the purchase of property insurance. If you’re purchasing a co-op, condo, or apartment, you’ll need to consider all of your options to find the best coverage at the best price.
Personal vs. Master Policy
The first thing you need to do is recognize that, if you’re purchasing a unit in a multi-unit building, you may need to purchase two separate policies, since one policy alone doesn’t usually cover all of the aspects of living in a building with many other tenants.
The first policy you’ll need to find is your own individual policy. Generally, these policies will cover your unit and everything in it. This means that if you are the victim of theft, all of your personal possessions will be covered up to a certain amount. If there is an unfortunate accident like a fire, your policy should cover this as well. If your particular unit needs structural upgrades due to safety reasons, this will generally be covered by a good and comprehensive policy.
The second policy you’ll have to consider is what is known as a “master policy.” This is usually provided by the condo board and will cover shared areas throughout the apartment. This means that if the roof, basement, hallways, or the elevator are experiencing issues, you will not be held liable to provide out-of-pocket expenses for repairs. Instead, the building is responsible for maintaining these locations.
If you are new to a property, do make sure you get copies of the building bylaws to bring to your insurance agent. They will then be able to help you determine what your personal policy will need to include and what is already covered by the master policy.
In some cases, you will want to consider including a liability clause in your insurance policy. While your individual policy will cover your entire unit, often the coverage stops there. But occasionally, as happens in multi-unit buildings, damage will be caused from one apartment to another. For example, a leak in the kitchen can affect the apartment downstairs, or a fire from a faulty hair iron left on might damage the connecting wall between units. In these cases, liability insurance will help take over some of the costs that you’ll be responsible for since the damage originated in your apartment.
Loss Assessment Insurance
Because buying a home is such a huge investment anyway, you would be wise to also consider adding on loss assessment coverage. This coverage is used as a supplement to the building’s master policy since those policies that cover common areas don’t often provide enough coverage to completely repair any issues. For instance, if a natural disaster causes a lot of damage to the outside of the building, the master policy will cover the damage up to a certain point, usually around $500,000. If the cost of the damage exceeds that by $300,000, that excess will be divided up by the number of units in the building and each owner is responsible to cover their portion. If you have a loss assessment policy, however, this will be covered, and you won’t need to pay anything out of pocket.
A final add-on that you should consider attaching to your primary policy is flood insurance, especially if you reside in New York City. Regular homeowner’s insurance doesn’t often carry a flood protection addendum since flood damage is often extensive and costly. You can check online easily to see if you live in a flood zone. If you do, it is highly suggested that you purchase a flood insurance policy.