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Part of your homeowner's association dues goes to pay for insurance on your condo complex. If the building burns down, or the roof blows away in a hurricane, you should be covered by your condo's master insurance policy. Additionally, the master insurance policy will usually carry specialized insurance, such as flood or earthquake insurance. However, this policy won't cover anything inside your individual unit, so you should consider separate condo insurance to insure your belongings.
Master insurance generally covers the exterior structures of all condo buildings as well as common areas such as pools, tennis courts or common rooms. In the event of a disaster, your condo complex's insurance will repair these areas, but will do nothing to restore your unit. You are responsible for replacing items such as wallpaper and carpeting. Whether you own or rent your space, you will need to purchase separate insurance to cover your possessions.
Unlike homeowner's insurance, your complex's master policy automatically covers you for damage to the exterior of your home at no charge to you. Regardless of the nature of the disaster, your home will be rebuilt and
you won't have to pay anything, including insurance premiums. Additionally, master policies include liability insurance that covers claims against injuries in common areas such as hallways or elevators, so you won't be liable if guests are injured in those areas.
Personal items in your condo should be insured for total replacement cost, rather than actual cash value. Replacement cost will reimburse you for the expense of replacing your valuables at today's cost, rather than what they are worth after depreciation. This insurance is more expensive, but is often worth the cost. As an example, consider what your ten year old TV is worth as opposed to a brand-new Plasma high-definition version.
Be sure to include liability coverage in your condo insurance. If a guest falls down inside your home, or if your birthday cake burns the building down, you could be sued. Liability insurance ensures that your insurer will make the payments instead of you. Beware of using condo insurance to cover small claims. Each claim will raise your premium, and multiple claims will cause your insurer to drop you altogether. Consider paying small claims out of pocket, rather than notifying your insurance company.