Coverage Needs During the Condo Boom
The number of condominiums in the U.S. exceeded 12 million in 2020, and that number has only continued to grow with no signs of slowing down any time soon.
Condos are attractive to developers because more units take up a smaller footprint compared to single-family homes. Additionally, condos and townhomes are in demand for buyers for many reasons:
- Less maintenance and upkeep
- Owners can have more of a hands-off approach to home ownership because lawn care and snow removal are handled by the association
- Attractive to busy young professionals looking to live in a metropolitan area
- Remote workers are moving all across the country
- Appealing to retirees looking to downsize
- On-site facilities often include perks such as gyms, clubhouses and pools
- Provide an option for a vacation home near the beach or mountains
- Residences can be rented short term on home-sharing platforms like Airbnb and VRBO
- Currently, there are historically low interest rates
- Buyers are using this to their advantage and moving to areas that previously only offered single-family dwellings out of their price range
According to Realtor.com, twice as many condos sold in May 2021 compared to May 2020. Cities like Park City, Utah; Aspen, Colorado; and Myrtle Beach, South Carolina, are all on the top 10 list of locations seeing an increase in condo prices. People in the Northeast might move to South Carolina for warmer weather, while others might prefer Park City or Aspen for skiing. Whatever the reason, condos have become a home-buying solution for many, especially in the past year when condo sales have doubled.
With a condo purchase, however, comes risk. Condo investments need adequate protection provided by HO-6 policies to cover common losses such as water, fire, theft and more. Landlords want coverage options, such as:
- Special Form (open perils) or Basic Form (named perils) for causes of loss
- Actual cash value or replacement cost valuation for both the unit and personal property
- Actual cash value will provide a decreased payment in the event of a loss because depreciation is deducted from the damaged items; replacement cost will provide full payment to replace the damaged item with a like or similar quality item
- The following is an example of actual cash value vs. replacement cost:
A condo unit owner spends $10,000 on hardwood flooring expected to last 20 years. The flooring is damaged in a covered loss halfway through its lifespan. In an actual cash value payment, that unit owner would only receive $5,000, as the 10 years of depreciation is taken into account. A policy with replacement cost will replace the flooring with brand new flooring of similar quality to what was damaged, so the unit owner would expect to receive the equivalent of the full $10,000.
The USLI HO-6 Condo Unit Owner’s policy allows the insured to choose from Special Form or Named Perils, as well as actual cash value or replacement cost. Additional coverage features include:
- Deductible options of $500, $1,000 and $2,500
- Full liability limit for personal injury (e.g., wrongful eviction)
- Loss assessment coverage can be applied as a result of a master policy deductible
- No charge to add a property manager and a condo association as an additional insured
- $5,000 in water backup coverage is automatically included
- A home-sharing endorsement to cover those condos rented on a short-term basis
Compare your HO-6 Condo policies to ensure proper coverages so no unit owner is left out in the cold! Please contact your Personal Lines underwriter today for more information or a quote.
As always, thank you for your support and business.
Contact Stacy Barrett
Product Leader | 888-523-5545, ext. 2108
Written by Cory Bennett