HO-6 Insurance – what’s that?  When you purchase a condo unit, the entire project is typically covered by a “master” hazard insurance policy.  Your condo or HOA dues include your pro-rate share of the cost of this master insurance which covers the common elements, fixtures, buildings and equipment beloning to the HOA.  So, if the building that  houses your condo unit is destroyed in a fire, the master policy will pay to rebuild the building and generally return your individual unit to the condition it was in when first constructed.

But wait a minute, what about the upgraded flooring and cabinets you had installed?  And the granite counter-tops and re-designed kitchen and bathrooms?  Well, unless the master policy has what is called “Walls-in” coverage, you would be out of luck unless you had an HO-6 condo unit owner’s policy.  In fact, it is now required on any condo mortgage where the loan is sold to Fannie Mae or Freddie Mac, is insured by FHA,  guaranteed by the VA or the USDA.

HO-6 coverage is for the interior of the condo unit and covers the “betterments and improvements” within the unit itself.  You can also add coverage for your contents to the HO-6 policy.  So, when you are looking to finance that condo purchase, remember to talk with your Realtor about the extent of the master insurance coverage provided by the condo association and then speak with your insurance agent about an HO-6 policy for your unit – your lender will require it and will also want to escrow for the annual premium (you’ll need to pay for the first year’s premium at or prior to settlement).

Here’s a flyer on HO-6 insurance coverage that you can use with your Realtor or that a REaltor can use with a client – click here:  HO-6 Condo Insurance Simplified

Please give me a call in the office at 302-537-5076 with any questions, post a comment below, or hit me up on Twitter or my FaceBook page if you need more information.