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The HO-6 condo insurance policy: a lot more than you think

Posted by Rona Fischman April 7, 2010 01:47 PM

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You need a lawyer, and a good insurance agent to really understand your homeowner's insurance. That goes doubly for condo homeowner's policies. Attorney Richard D. Vetstein. tells you what he knows...

The recent flooding here in got me thinking about the importance of good insurance coverage. So I dug back into my notes and remembered that I never wrote about how lenders are now requiring “HO-6” insurance policies for condominium purchases. An HO-6 policy is like a regular homeowner’s policy, but for a condominium unit, and covers the interior of the unit and personal property inside–commonly known as “studs in” coverage.

HO-6 now required by lenders under the new Fannie Mae (FNMA) and FHA overhaul of condominium lending guidelines, lenders are now requiring HO-6 policies. Sounds like common sense, but many folks were under the mistaken impression that the master condominium insurance policy covered all damage to the interior of their unit as well as damage to furniture, appliances, etc. That isn’t so.

Coverages HO-6 policy coverages include: • Coverage for damage to personal property such as furniture, computer equipment and clothing • Coverage for losses under master policy deductibles • Personal liability coverage • Interior walls and floor coverings coverage • Coverage for improvements or upgrades (most master insurance policies only cover the original condition and value of the unit). • Usually has small deductible and fairly inexpensive Under the new lending rules, an HO-6 insurance policy must provide coverage for no less than 20% of the condominium unit’s appraised value. High Deductible Protection Another great benefit of an HO-6 policy is that in certain situations, it will provide coverage for losses under often high deductibles on a master insurance policy. These days, condominium associations have been cutting costs by increasing their deductibles, anywhere from $10,000 to even $50,000. What’s more, condominium documents often provide that the unit owner is responsible for losses falling below the deductible. So an HO-6 would fill in this “gap.” Special Assessments HO-6 policies can also provide coverage for unexpected special assessments. Think $50,000 roof replacement project.

I want to thank Nadine Heaps, the owner of Purple Ink Insurance Agency, Inc. in Ashland, MA for assistance with this post.

This blog is not written or edited by Boston.com or the Boston Globe.
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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