5 Common mistakes when buying condo insurance
Buying your first condo is an incredible milestone: Your own four walls, for you to decorate and furnish and live in as you please. Or perhaps you’re hoping to rent out your condo and jump on that passive income train. Whatever you decide to do, purchasing a condo is a joyful moment, but also carries with it significant responsibility. As a condo owner, you’ll be in charge of caring for your unit and paying your condo fees on time, in addition to any mortgage you may have. There’s also one thing no responsible condo owner should overlook: purchasing condo insurance.
Condo insurance is vital in protecting your unit, including your belongings and the structure of the condo itself. Condo insurance also provides important personal liability protection, which covers you in case someone is injured in your home or you or a guest cause damage to the building your unit is located in. But before you decide to lock down a policy, here are some common mistakes to steer clear of:
1. Ignoring the deductible
A deductible is the dollar amount you have to pay upfront before your insurance covers the rest when making a claim. Oftentimes, a higher deductible leads to lower monthly premiums, which is why many people choose higher deductibles. However, beware of going with a deductible you can’t realistically afford, or which will hurt you financially. Many people have an “it won’t happen to me” attitude when it comes to insurance coverage, but you don’t want the unthinkable to occur and then, on top of the stress of a break-in or an accident, be faced with an impossibly high deductible.
If you want to find a happy medium between your monthly premiums and your deductible, take a closer look at the coverage and make sure you’re only covered for things you think you’ll truly need. If your coverage includes incidents you think are unlikely to happen—such as snowstorm coverage in an area where such a weather event is uncommon—then ask to have it removed and have your premiums adjusted.
2. Choosing cash value compensation over replacement value compensation
Yes, cash value compensation sounds good on paper. Who doesn’t like the thought of an immediate direct deposit? But cash value compensation simply means that you’ll be compensated for damaged, lost, or stolen items at the original value at the time of purchase. But the truth is that things like inflation and heightened demand exist, and a laptop or refrigerator that cost $800 when you bought it four years ago now costs $1,200. However, if you choose cash value compensation, you’ll only get $800, no matter what the item costs today.
If you choose replacement value compensation, on the other hand, you’ll receive the value of the item at the price it would cost to buy it today. So even if you bought your laptop for $800 back in 2019, you’ll receive $1,200 if that’s what it costs today. As you can see, replacement value compensation is usually a better deal.
3. Getting insufficient coverage
Many people think that their building’s insurance covers them and their belongings, but this is not true. The condo association’s insurance only covers any damage to common areas, such as garages, elevators, patios, stairs, roofs, and hallways. Anything that’s within your own four walls is not covered by your building’s insurance. That’s where condo insurance comes in.
But even then, it’s important to ensure that you have sufficient coverage. Some policies may only offer “bare walls” coverage, which means that only damage to the condo’s walls, ceilings, and floors will be covered. This doesn’t include furniture, cabinetry, lighting fixtures, and other construction details in your unit. So make sure you’re accurately assessing the value of your belongings, including high-value items like electronics and jewelry, and consider any additional coverage you might need based on your surroundings: Do you live in an old building that may be in more need of repairs? Is your area a known earthquake or wildfire area? These are all aspects that need to be considered when determining how much condo insurance coverage you’ll need.
4. Expecting your tenants to pay for condo insurance
If you’re planning on renting out your condo, you might think that you can pass on the responsibility of paying for condo insurance to your tenants. That would be a big mistake. Tenants are not responsible for paying for your condo’s insurance. If they’re getting insured at all, they’re going to be using tenant insurance to protect themselves and their belongings.
And since tenant insurance doesn’t have the same coverage as condo insurance, you’ll be on the hook if there’s damage to your unit that falls under your area of responsibility. If the built-in appliances in the condo need maintenance or replacement, for example, your tenants’ insurance won’t cover that. This is where your condo insurance will come in handy. So even if you’re renting out your unit, you should make sure to purchase condo insurance.
5. Not shopping around
One of the cardinal rules of shopping for any type of insurance is that you shop around and get quotes from different providers before settling on a policy. This is because different providers will have different rates for different types of coverage: Perhaps one policy includes coverage for valuable electronics, while another requires you to purchase extra coverage for electronics valued over a certain amount. Perhaps one policy has a higher deductible for the same type of coverage than another. Another provider might offer discounts for first-time customers, or give you a special rate if you purchase multiple policies from them. You’ll never know unless you see what’s out there.
Luckily, YouSet makes it incredibly easy to compare different policies and find the right one for you. With just a few simple questions, we’ll create a tailored list of policies that fit your criteria and match your budget. And once you find your perfect policy, you can purchase it right there on our site. No unnecessary phone calls or paperwork is needed. Come check us out!
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