In most ways, your condo or townhome is like any freestanding, single-family home in Georgia. You own it, and it’s where you and your family live — just like a more traditional home. But when it comes to homeowners insurance, there are some major differences. Your Southern Harvest agent can explain the details and help you choose the right policy for your home.
In the meantime, here are the highlights.
What Sets HO-3 and HO-6 Insurance Policies Apart?
Start by looking at the similarities. Both homeowners insurance policies secure your finances and protect what’s yours. But here’s how they differ.
Your Standard HO-3 Homeowners Policy Protects Your Traditional Single-Family Home
This type of homeowners insurance coverage is for freestanding homes. You’ll get structural or dwelling coverage, financial protection for your personal belongings, and liability coverage for any legal problems that might arise concerning your residence.
Consider a house fire. The flames might have damaged the floor, ceiling, HVAC system, electrical system, roof, and other structural elements. They’re all covered.
In the process, the fire destroyed furniture and furnishings, major appliances, expensive electronics, and valuable antiques. Your smoke-damaged clothing and linens are also ruined. Again, your insurer will cover your claims.
The fire might have also thrown sparks that ignited the neighbor’s roof, triggering significant damage to their home. The investigation determined that someone in your family had left a candle burning, and nearby drapes caught on fire. Your neighbor sues you for negligence. You must hire an attorney. If you lose the case, you’ll have to pay damages and court costs. However, your liability coverage will help with those costs, greatly reducing the financial burden.
Furthermore, your HO-3 coverage will help pay for your temporary housing costs while your home is being renovated. You get all of this and other benefits with a standard HO-3 policy.
An HO-6 Condo/Townhome Policy Protects What’s Yours
If you own a townhome or condo in Georgia, your living space belongs to you, but not the whole building or grounds. So why should you pay to insure more than what’s yours? That’s the concept behind HO-6 condo insurance.
Your unit or dwelling coverage covers the physical parts of your home that you own, as well as your personal belongings in the event of fire, windstorms, internal flooding, theft, vandalism, or other causes of damage, destruction, or loss.
And, just like with a conventional HO-3 policy, you’ll get liability and temporary housing benefits if you need them. But your policy doesn’t cover the common space, and why should it? Those spaces don’t belong to you individually. They’re the responsibility of the owners or, collectively, all tenants as part of a homeowners association (HOA).
If you own it, your HO-6 policy covers it. If you don’t own it yourself, it is usually not just your responsibility to pay for it — or that of your insurer.
Comparing Coverage Levels Between HO-3 and HO-6
The main thing to remember here is that either form of homeowners coverage will protect you financially. That’s because both cover what you own. Now look deeper.
Ground-Up or Walls-In
The terminology might sound odd, but “ground-up” and “walls-in” describe the coverage levels of the two different types of homeowners plans: HO-3 and HO-6.
HO-3 coverage for a traditional, single-family home literally covers your finances from the ground up. That means everything in your home, from the basement to the roof, and all of your grounds are insured. That’s because it’s all yours if you own this kind of home.
HO-6 coverage, on the other hand, covers all of what the industry calls the open perils, or everything you own on a walls-in basis. This means that your policy covers only your unit of ownership, whether it’s a condominium, an owned apartment, a townhouse, or any other kind of residence in a shared space. This is appropriate because you don’t own the whole building, the common spaces such as the lobby or basement, or the property surrounding your space.
How Common Areas, Associations, and Master Policies Affect Your Protection
All of the terms above only pertain to an HO-6 insurance plan. That’s because you’ll only deal with common spaces, homeowners associations, and master policies if you own a condo, townhome, or other such unit in a shared space.
If you’ve bought a unit that’s part of a homeowners association, or HOA, you’ll help pay to insure the common areas by splitting the cost with all others who also own units in that property. This is in addition to your own individually owned HO-6 homeowners insurance policy.
Remember, your HO-6 policy only covers what’s yours. But you might also share in paying the master policy that insure the common spaces and infrastructure. This second insurance policy probably won’t cost you much since you’re sharing the cost with perhaps many others.
But between the two policies, you’re covered for just about anything that can go wrong in and around your place of residence.
Evaluating Costs, Liability, and Added Protections
In many ways, your HO-6 policy is like HO-3 coverage for a more traditional, single-family home. In both cases, you can file losses to what you own. That means dwelling coverage and coverage for the loss or damage of your personal possessions within that dwelling.
It’s just that when you own a condo, you don’t own the entire building and grounds, so your HO-6 policy rightfully won’t cover that outside property. Only walls-in coverage is extended, not ground-up.
What Drives the Cost of Premiums?
Think about the current value of your condo unit and the value of the possessions within your living space. That’s what concerns you as you determine your coverage limits and deductible.
Your HO-6 policy also likely includes a loss assessment benefit. This covers your assessed share of costs that exceed your HOA master policy. For instance, if a major fire damages or destroys much of the shared space, the total cost might exceed the coverage limit of the master policy. If that happens, the HOA might split that excess cost among all unit owners.
If that happens, the cost assessed to you could be in the thousands of dollars. But that’s not a problem if you have loss assessment coverage on your individual HO-6 policy, because your insurer will cover it.
Gaps to Watch For
If you own high-value items such as art, antiques, jewelry, or collectibles, their value if stolen, damaged, or destroyed might exceed your coverage limit. Ask your agent for the cost of covering such items separately.
Also consider the possibility of flood damage. Internal flooding, such as from a burst water pipe, is covered in standard HO-6 policies, but external flooding is usually not covered. So, ask our agent if the Georgia property is within a flood zone, and consider purchasing additional flood insurance if it is.
And finally, make sure you make a wise decision on your coverage deductible. The deductible is the amount you agree to pay before your insurer pays the rest of your claim, up to your coverage limit. If you carry a high deductible, your premiums will be lower because your insurer will be responsible for less. But watch out for a deductible that’s too high for you to cover if you must.
Your agent would be able to help you find the sweet spot between a deductible that will lower your premiums and one that you can afford if you must pay costs out of pocket.