Condo insurance can be more complex

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Getting insurance for a condo is a lot different from buying a policy for a single-family house, and it can be pretty confusing for many new condo owners, especially when it comes to insuring personal items like furniture or deciding if they need to insure the unit itself.

It really all depends on the condo association's bylaws.

"The key thing is for people to have a copy of the condo association's bylaws and review it with an insurance representative, because it will be the key to deciding the coverage you need," said Janet Scott-Buckley, a manager for Harrington Insurance Agency in North Andover, Mass.

For the sake of efficiency and controlling costs for the condo owners, the condominium association may insure all the building and common areas under a single package policy called an association master policy.

There are two types. One is called "all-in," which means the condo master policy bought by the association covers both the building exterior and the units themselves. The other type of master policy covers just the building.

"If your association has an all-in policy, you just need to insure everything that would come loose if you could pick up your unit and shake it," Ms. Scott-Buckley said.

Condos can often be more sensitive to real estate trends than single-family homes. When home prices take a dive, condominiums are often the first to feel the pain and the last to rebound.

The Pittsburgh region's condo/townhome market experienced strong appreciation from 2000 to 2008, averaging 7 percent increases annually, according to data from RealSTATs, a South Side real estate information service. In the last four years, however, prices have effectively flatlined.

"Similar to the overall housing market, condominium sales here peaked in 2004 and fell off nearly 30 percent from 2004 to 2008," said Dan Murrer, vice president of RealSTATs. "The annual number of condominium sales has held steady in each of the last four years in the 2,900 range."

The median price of a new condo in the region, according to Mr. Murrer, was in the $230,000 range in each of the last four years and is over $240,000 so far in 2012.

Professionally run condo associations always have a master insurance policy. But sometimes a condo association may only be a small building with two or three units and no one has bothered to buy a master policy.

It's critical to check on those details.

"The owner must be aware of what is covered by the master policy in order to be properly protected against any potential coverage gaps that may exist," said Joe Vahey, vice president and product lines manager for Erie Insurance Co. based in Erie.

While an all-in master policy covers damage to a unit's walls, floors, ceilings and built-in appliances, there is one catch. The policy typically pays to restore the unit to the condition it was in when you bought it.

"If you make additions or upgrades to the unit -- like adding granite countertops to your kitchen or installing that glamour bath -- those upgrades might not be covered," Mr. Vahey said.

For that reason, he suggests that condo owners consider adding or increasing their building additions and alterations coverage to their policy.

Getting the right amount of insurance coverage can be a tricky exercise simply because most insurance agents don't have automated replacement cost and construction estimates for condos as they do for houses.

Condo owners will need an experienced agent to help them buy the right amount of coverage for the physical unit, as well as liability insurance and coverage for their personal possessions -- such furniture, clothing and electronics.

State Farm Insurance Co. estimates that an average 1,125-square-foot condo would need roughly $55,520 in coverage for personal contents.

"You really need to understand the difference between your personal policy and the master condo policy," said Dave Phillips, a spokesman for State Farm Insurance in Concordville, Delaware County.

Sometimes the bylaws will state that the balcony of a condo is actually owned by the condominium association, which means it's covered by the master policy. Other times, it is owned by the condo unit owner, which means it's covered by the unit owner's personal policy.

"If you are going to purchase a condo, you need to ask to review the master condo insurance policy," Mr. Phillips said. "On many occasions, there is sometimes a gray area and confusion on what is covered by the master condominium policy versus the personal condo insurance policy."

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Tim Grant: tgrant@post-gazette.com or 412-263-1591


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