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Revisiting my condo insurance policy

I recently upgraded my condo insurance policy coverage. Here is what I learned and why I upgraded.

For the past 2 years I have had a condo insurance policy through Geico. I decided to revisit my policy to make sure I have adequate coverage. I emailed my policy to my financial advisor who ran it by one his colleagues and they identified that my ass is a little bare. 

What’s the point of having insurance if you’re underinsured! Back in the day when I was working full-time, I had no issue self-insuring my condo. Now that I am retired, I need to make sure this asset is protected and that nobody can sue me and drain my net worth. 

When it comes to loss and protecting against risk I’ve learned my lessons. I’ve had a job loss because I didn’t adequately protect myself. And I had rental car accident for which I found out last minute that I was covered. 

 

Condo insurance policy

Condo insurance is not much different from a single family home property insurance.

The main difference is that the master policy for the building is the main insurer and I, as a unit owner, need coverage in order to insure everything beyond the master policy. 

For example, my master policy will involve the roof of the entire building, foundation, and sometimes the plumping within the walls. But your walls, wood floors, kitchen, and bathroom are your financial responsibility in the case of theft, fire, or water damage from a neighbor. 

Your personal condo policy is often referred to as an HO6 or HO-6 

Determining adequate coverage

If I didn’t have a financial advisor, Andrew, I would have no idea how to determine adequate coverage. I find most insurance agents insufferable. And my needs as a high net worth, early retired physician are unique. 

For example, if you entertain regularly then your insurance needs will change. If you have an older building then your liability coverage might need to be higher. 

 

Condo master policy

The master policy is often included in your massive HOA dossier. If you don’t have it, you can request it from the management company or ask another neighbor for a copy. 

Your HOA dues go towards maintaining the building and pay for part of the master policy. If the entire building goes up in flame from a rogue dubie, the master policy will help rebuild the entire apartment complex and often will build your unit according to the standards of what the building was insured for. 

Any remodels you made would be your own responsibility. This includes any permanent fixtures, though some master policies will cover that as well. If you don’t know what your master policy covers, you won’t know what kind of private condo insurance to purchase. 

 

My master condo policy

I recently switched from my Geico condo policy to an Allstate policy. I needed to increase my limits and there was no way of doing it online with Geico so I opted for a new policy. 

Old Geico policy – $197/year

I had $20k for personal property which would include furniture and personal technology. 

I had $15k for the dwelling. Why so low? Because my condo is small and besides some drywall and hardwood floors and a tiled bathroom, there isn’t a whole lot that would need replacing. 

Personal liability was at $100k in case someone sues me after getting injured on my property. 

My deductible was set at $5,000. 

 

New Allstate policy – $285/year

My new policy has an increased amount for the contents (personal property) – $30,000. 

I have more coverage for contents (dwelling fixtures) – $30,000. 

I also increased my loss assessment – $10k. This is the amount my policy will cover if there is damage to common areas which the master policy inadequately covers. Read more here

I lowered the deductible from $5,000 to $500 because the deductible level isn’t a big cost driver for my annual policy fees. 

I increased personal liability from $100,000 to $500,000. My net worth is high enough and as a physician I’m a big enough target that the higher limit is necessary. 

The other day my buddy had his 5yo son over at my place. The kid opened the window and was hanging out of it. Risky? Yes. Lawsuit potential? Unlikely.

But it’s considered good faith to have liability coverage, making it far less likely for someone to file a suit since there is coverage already. Had no idea – learned this shit from my financial advisor. 

 

Water damage

A word about water damage. I’ve owned 3 different condos in my life. If ever there was any damage or loss it was always water damage. 

  • broken refrigerator water supply line
  • upstairs neighbor’s burst pipe
  • water damage from a leaking roof
  • condo owner doing their own remodeling, not knowing what their doing
  • faulty drain pipes which corrode over time

Though my favorite story is my buddy’s whose wife was in the bedroom pleasuring herself while their kiddo was playing in the bathtub which didn’t have an overflow. My buddy comes home to find a downpour from the kitchen ceiling – epic!

If my unit springs a leak then I could damage 2 units below me, 6 units below them, the common area, and the commercial units nearby. That’s a whole lot of damage and money that needs to be paid out.

At least I have an overflow on my tub. 

And if my neighbor above me springs a leak and they don’t have adequate insurance, it’s necessary that I have enough to repair my condo. 

You get the idea. 

 

Fun statistics

Here are some fun (?‍♂️) statistics when it comes to home ownership andinsurancee claims. 

The average payout for damages per claim type are above. For water damages we’re looking at about $10k per incident. 

5.3% of homeowners filed a claim due to damage or theft in 2016. 

Only 50% of homeowners have an inventory of what’s in their home. Even fewer have any proof of those items. 

The average annual insurance premium for an Oregon homeowner was $643 in 2015. $986 for a California home. $1,900 for a Florida homeowner. 

Poisoning, falls, and choking were the top 3 injuries reported in a home. There were 74,000 unintentional deaths in a home and 20M injuries reported in 2015. 

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