Do I Need Townhouse Insurance?

You may be asking yourself if you need to buy townhouse insurance if your homeowner’s association already insures the building and the common areas.  Here is a list of all the things that will not be covered in an association’s master policy:

• Personal Belongings:  Under a master policy your belongings will not be covered from fire, theft, water, or other issues.
• Personal Liability:  You will not be covered in the event you are sued by a third party for damages to themselves or their property in your personal space under a master policy.
• Loss of Use:  If your townhome is destroyed or made unlivable the building will be covered by the master policy.  However, you will not be entitled to alternate living expenses under this policy.

These three things can make up for giant expenses in the event anything happens to your townhouse.  Granted, the master policy will cover the structure in the event of the need to rebuild, but can you afford to replace everything you own or cover your guests in the event they’re injured in your condo?  Most of us would not be able to afford either of these on their own, let alone together.  Here are some things you should answer before you start shopping around for your own policy:

1. Take an inventory of all your belongings (clothes, electronics, furniture, glassware, and everything else) and attach current replacement prices on them.  This means how much it would cost to get a new set of glasses as opposed to what you initially paid for the ones you already own.
2. How much Personal Liability coverage do you need? Make sure you have enough coverage so you do not have to liquidate your assets to cover the lawsuit.
3. Evaluate how much money you`d need to cover a lawsuit without having to liquidate any of your assets.
4. Know exactly what portions of the building your association master policy covers.  Some will cover the entire structure including your flooring and walls while others might only cover the base floor and the drywall.

A common mistake when it comes to shopping for insurance is that townhouse owners do so based only on premium cost.  However, this is not the best way to go about things.  Here are four tips to help you know what coverage is included so you can get proper quotes for comparison:

1. Premium cost for depreciation value (cash value) of your belongings vs. complete contents replacement coverage.
2. Specific perils covered and whether or not there is an Act of God clause where fire might be covered but flooding and lighting damage are not.
3. Pet coverage included in the liability?
4. Coverage for assessments imposed by the association and if so, how much coverage is available for how much?