You probably own everything from the exterior walls, in. Get quotes from three insurance companies. They'll probably want to know the square footage of your townhome.

I don't know how it would translate to home (Chicagoland), but the insurance premium on our 849-sq ft condo in Kihei is $190 a year. (We don't have earthquake or hurricane coverage.)

Chisue,

Hi! Thanks for the info. Yes, I've already called up 6 insurance companies last week:) Anyway, they asked how much dwelling coverage that I need. I believe that's the replacement cost coverage. They told me to contact my homeowner's association for the estimate. Just now I called my homeowner's association and they said that it has nothing to do with them.

House,

Think of condo/townhouse as a middle ground between owning a home and renting. When you own an individual home, you insure the structure and the contents against physical damage losses (fire, theft, etc) and your property against liability claims (lawsuits). When you rent, you only insure your contents. You don't own any part of the structure, therefore you don't insure it.

When you own a condo, the problem lies in the fact that it is impossible to discern where your home ends and your connected neighbors home begins. To solve this problem, the association buys a master policy. This generally covers the structure to the sheetrock on your walls (I say "generally" as lots of condo master policies differ).

Where does this all leave you? Most condo/townhouse policies are written with an emphasis on the contents number. Most companies have an "estimator" that they will use to help you come up with a number. It's only an estimate. My advice would be for you to do an inventory and come up with your own number. While your at it make a video of your stuff for potential loss proof down the road.

This is where it gets a little confusing. In the policy you are also given some coverage for internal structures. Usually it's 10% of the contents number. The problem is, that's nowhere near enough coverage if you have a loss. Things that your master policy DOES NOT cover are things like kitchen cabinets, tubs, toilets, etc(these are the "internal structures" I referred to). I would advise you to get a copy of your master policy and read it. It won't be easy, but as I said, they all vary in coverage. I've seen policies that end at the studs...the sheetrock is the home owners problem. I usually advise my clients to increase that number to around $30k. There is a charge but it shouldn't be too big. Some might argue with that number, but I feel that most condos are built with builder grade materials, and that's all your policy is obligated to replace.

Finally you should add "Loss Assessments" coverage. This coverage protects you should the association not have enough coverage for a loss that doesn't happen directly to you. Remember, if your place has 100 units, you are 1/100th owner of the entire place. Loss Assessments is usually $50k of coverage for about $20/yr.

I own a couple of insurance agencies in CT, and have been writing this kind of insurance for about 18 years. Hopefully this helps.

Mark

You need to know if you're buying a condo or not. In your post you didn't mention it being a condo, but by saying you think the Homeowners Assoc covers the outside, that seems to indicate it is a condo.

Townhouses aren't necessarily condos. In my area, virtually none are. We mostly just have appartment type condos here. If it's not a condo, then your insurance will need to cover the outsides, including roof. If it is a condo, then usually the condo association covers the outside, since you don't own that.

I buy homeowners insurance for one thing: catastrophic loss. I don't know what your property is worth, but imagine the worst thing that can happen: your property is insured for $200K, it burns to the ground, and rebuilding costs $250K. Do you have another $50K sitting around that you'll be happy to put into the property, or would you wish that you'd spent an extra $75 a year to have complete coverage? What I'm saying is: start with what you paid for it, factor in whatever you learn from the insurance folks, and add something to that. Then make sure you get an automatic inflation adjustor option so that, 10 years from now, you're not still carrying $250K insurance on a $500K property. And also get "replacement cost" coverage on the contents: it's not much more, and you'll be able to get enough to go out and buy new items rather than getting a $100 reimbursement on your used big screen tv.

We lost our house in a fire a few years ago. Many people were underinsured, because they wanted to save money on premiums. One of those people lived on my street, and his 5 acre lot still has the remainder of his brick wall and fireplace. He can't afford to rebuild. We had adequate insurance, and built a new home.

Figure out the building cost, and then get a replacement policy with building code upgrade coverage. The latter pays for anything you must do at time of construction that wasn't required in the original house. We had many items, such as needing fire sprinklers, a different type of roof, venting, etc.

Mark,

Thanks for the explanations and they are very helpful. May I ask what's the major difference between dwelling and private structures? I understand that private structures included everything that's nailed down like cabinet, toilet and etc. Which one should I put in more coverage? My townhome also has a unfinished basement, I plan to use it as storage and put my fish tanks down there. I don't plan to get the Backup of Sewer/Drain/Sump-Pump coverage until I finish the basement. Do you think that's a good idea?

thetews,

Thanks for the input. The one that I'm buying is a townhome with a homeowner's association. I called them up yesterday and they said all I need to get for the homeowner's insurance is HO6.

kudzu9,

Your brought up some valid points, thanks. To get peace of mind, I better have to pay for it. It's a win-win situation for the insurance company:(

sandiego2,

Sorry to hear about your loss but glad to hear that your insurance covered the rebuilding of your house. I think the biggest challenge that I have now is how to figure out the rebuilding cost. I talked to the insurance agents and they can only estimate by the sqft. I think to get a better estimation, I need to talk to some building contractors.

HO6 is condo coverage. you are not buying a town house but are nuying a condo. The differance is that a townhouse owns the land it sits on and sone yard (front and back). In a condo you own ony the interior of the unit.
I would not buy, butif you are commited the best thing is to get involved woth whatever association there is and protect your investment.
The biggest problem withthese types of developments is if there are to many investor owned (non-owner occupied) properties. Even financing can becone a problem.
Caveat Emptor.

I'd be a little careful using a regional definition to define a townhouse. To me a townhouse and a condo are quite similar. Major difference being a condo occupies 1 story, usually with other units above, below, and possibly even left and right. A townhouse may have attached units left and right, but not above and below. Sort of like people in the midwest calling a 1 story house a rambler and people in the northeast calling it a ranch.

While a large investor population would certainly pose some problems, it would seem that occurs just as frequently with condos as townhouses.

House, I'm not quite sure what you mean by "dwelling and private structures", but I'll take a guess. Some of the responses seem to be referring to a stand alone house as opposed to a condo/townhouse. Home policies have dwelling coverage (coverage to rebuild the entire structure). As a townhouse owner, your master policy rebuilds the majority of the structure. You are then responsible for certain internal items...cabinets, toilets, etc.. As I said above, the 2 major components of a condo/townhouse policy are contents and internal building structures. Most policies I write tend to have more contents coverage than internal building coverage.

I think it depends on your personal situation. If this is your first "home" purchase, you may have mostly "hand-me-down" furniture. I don't mean that to be insulting, just to point out that a large portion of your contents may not have high value. Compare that to some one downsizing (kids out of college, etc) with furniture from a high value home and many years of accumulation.

Most of the policies I write tend to have between $30k & $50k of additional "A" Coverage (internal building coverage), unless I have knowledge that the units are built with particularly high end items to attract a higher end buyer. Contents coverage mostly falls in the $25k to $50k range, with some downsizing clients in the higher range... $100k plus.

I definitely agree with waiting to finish the basement. Some careful snooping around, along with a full year of changing weather will tell you how water proof your basement is. I'd also keep whatever you store down there up on pallets or blocks until you know how dry things are.

I'd check with who ever writes the insurance for how much the extra coverage is. My experience is that most clients never review/follow up on their policies. If the coverage is not expensive, I'd just add it and forget about it.

Mark,

Thanks again for being very helpful.

The unit that I'm buying is a townhome but with a homeowner's association. I got very confused after reading some of the postings here regarding the definition of townhome and condo. I've confirmed with my real estate agent that it's a townhome and I own the land underneath the 2 story building. BTW, we still call 1 story house here as a ranch in IL:)

According to the homeowner's association's disclosure, the master policy covers the exterior and the drywall. But to play safe, I've asked my lawyer to get a copy of the policy so I can read thru it.

You are absolutely right on about the furniture. I don't have much and most of them worth nothing becoz I acquired them from garage sales:) I never want to spend big bucks on furniture until I buy a house and settle down. I'm thinking of $30K coverage for my personal property will be more than enough. Most insurance agent suggested $35K coverage on the dwelling, pretty close to your estimation.

Thanks for the advice on the basement. One of the insurance agents also advised me to put stuff on pallets:)

Glad to help.

One last thought. Yes your stuff is "garage sale" quality, but the coverage you are getting is Replacement. Before purchasing my most recent house I had a ton of things from relatives. Several of whom lived in million plus homes. None of it matched, but my thinking was exactly like yours. Boy is my wife taking great pleasure in reminding me of that now. I had a running joke with my wife that I should only be so lucky to have my house burn down...I'd have made a killing!!

My point is, try and think in terms of what each piece would cost new. Your couch may be a POS, but the label on the bottom may say Henredon. In which case your $50 garage sale couch would be replaced at something closer to $5000. And PLEASE, PLEASE, PLEASE, do make a video of your inventory. Remember, it's up to you to prove to us what you have.

Re: the ranch comment. I keep seeing that nitwit Pat Simpson on all those home shows he's on, referring to a ranch as a rambler...I thought a Rambler was a car!!

Mark

You have a regular house with a homeowners assoc. You need to review the HOA to determine what they cover (roofs, outside walls, etc.) but it sounds like you have a home not a condo/coop.

I am a claims adjuster for a major insurance co. the policy should be based on rebuild costs - what the HOA covers. it is NOT the market value of the property which is not basd on rebuild costs. normally its square footage plus any extras (fireplace, CAC, CVAC, etc.). the contents will be a % of the policy usually 60-75%. you can purchase more if you want.

you have to insure at least 80% of the rebuild value in order to get 100% of the policy. if your house costs $200k to rebuild you must insured at least $160k in order to get $200k in benefits. Also get full replacement costs.

Most if not all insurance companies no longer have guarantee replacement for the physical structure. if house costs $200k to build 10 years ago but now costs $400k to rebuild you will only get $200k. most policies now give you 20-25% addl above the face value. you should get sewer backup coverage as it is not expensive to add.

mnk,
Where did you get the information that most insurance companies don't offer replacement value policies anymore?

My policy is a replacement value policy and most people I know in my area have the same kind of coverage. (I know this because I and most others in my area are still dealing with insurance claims from Katrina and/or Rita; insurance policies are a common topic of conversation around here.)

The house I sold last summer in Florida had the same kind of coverage, so it's not unique to Louisiana.

This is not the case with federal flood insurance, as many have found out.

There is replacement value for the personal property or contents. That is usually unlimited.

I am talking about the physical structure to rebuild the home. The only company that i know of that gives full replacement on rebuilding is Chubb Ins. but it is expensive. Flood insurance is capped at $250k.

Most of the companies I've heard of capped replacement just as mnk stated. 100% Guaranteed Replacement was too much of a blank check. Shareholders don't like blank checks. Pretty much a lesson learned after Andrew. I heard some interesting stories after that one.

I'm not positive but would tend to agree with Chubb still having full replacement. In my area they tend to be about $750-$1000 per year more expensive than the same coverage with other companies. They are a great company with a unique way of doing business. For some people they are a perfect fit. For most however, it's sort of a "...why buy a Mercedes when a Honda will do just as good a job...".

One disagreement with mnk...replacement cost on contents is not "unlimited". Whatever limit is on your policy is the amount you have. Also, you must replace the item lost. The company will not give you the dollar value of the item. They usually pay the ACV up front, then the difference once proof of purchase is given.

thats true the replacement is up to your personal property limits.

however a lot of companies no longer do partial payments for contents. they will usually take the salvage and give you the money or get the new item for you.

mnk, I misread your first post on this. Most of the Replacement Cost endorsements ARE capped at 20 or 25% over the insured amount. This is intended to account for sudden increases in construction costs, such as we've seen here post-Katrina.

Homeowners should review their limits annually and adjust as necessary to keep their coverage at least equal to the current replacement cost. Insuring to only 75 or 80 % would leave you very vulnerable to the sudden increase in construction costs that will almost certainly follow a natural disaster.

Many, if not most, of the flood victims here were uninsured or underinsured. Most of the underinsured ones resulted from a failure to EVER increase coverage to allow for inflation, let alone annually.

"To me a townhouse and a condo are quite similar."

Ask HUD. They do not seem very confused.
If you own the land you are sitting on (or even pay ground rent)it is not almost never a condo.
If you do not own the land (or do not pay ground rent) you almost always have a condo. You own the inside of the wal from the paint film in (but often not the actual common walls).

I have replacement cost (structure) on my policy - the company is Amica Mutual. I live in South Florida, Palm Beach County and I have had this policy on my home since 1995. My premium increased a couple hundred dollars for the year, which after what happened around here last year, isn't all that bad. My hurricane deductible is 2% of my dwelling amount (about $4500) Better than nothing and hopefully it will never come down to replacement. We don't live by the water. (12 miles inland).

mnk716,

Thanks for the great info, really appreciate it. I'm waiting for my mortgage broker to get the master insurance policy from the HOA so I know how much to insure.

"Ask HUD"

As soon as I'm done typing I'll call my dad's brother, he happens to hold one of the highest career positions at that very agency.

Unfortunately, the rest of your post was a little difficult to follow. As I said to the OP, I've been writing the same insurance he/she was asking about for 18 years. While I'm sure my definition of a condo disturbs you, your description of what a master policy covers is just irresponsible. I have yet to come across to identical master policies.

It's probably not the best thing to give such concrete advice about topics with which you are clearly not that familiar.

Technically a townhouse is a style of building, and a condo is a form of possesion.
HO6 is condo coverage, not house coverage.
"Unfortunately, the rest of your post was a little difficult to follow."

I did not say anything about a master policy, but in a condo you legally own only the air in the unit and not a lot else.
It has nothing to do with the insurance coverage of the master policy, it has to do with the terms of holding title.

You own and are reponsible for the surface of the shared walls, but do not own the common walls. They are owned by the condiminium as a common asset.
This runs even to the plumbing in the common walls (and floors and ceilings for that matter). If a leak develops inside your unit you are responsible. If a leak develops in the commonly owned portions the condo holds the bag. If they are smart they have insurance to cover this. If not it comes out of thier general funds.
Electric wiring gets a lottle harder, but generally complies with the same rules. Another 'gotcha' in condo ownership is that many states will not allow any owner electrical, plumbing, or gas work since the building is not single family housing. If you make a mistake you have put others at risk besides yourself.

"HO6 is condo coverage, not house coverage." Thanks for clearing this up for me. At least I'll now get that one correct at my next continuing ed. session.

I'd love to see the look on your face as you explain legal theory to the claims adjuster who just denied your claim. Let me know how that works out for you.

It took about 2 seconds to find this one:

"Did you know that it is the responsibility of each condominium unit owner to purchase liability and personal property coverage for the interior of his or her individual unit?

This type of protection is commonly referred to as an HO6 / Condominium Unit Owners Policy."

The lawyer I sleep with every night seems rahter clear on these terms, as have the insurance companies I have worked withand for.

Just what do you thing the title to a condominuim covers?

I've got an idea...divorce the attorney and marry an english teacher. At the very least a typing teacher.

I don't "thing" a title to a condo "covers" anything. Insurance policies "cover" things. As I am not an attorney, I could not give you the legal definition of title. What I do know is that insurance is regulated on the state level. Therefore, there is a distinct possibility that not all HO6 policies are identical. I also have a strong suspicion that your bedfellow is not licensed to practice law in all 50 states.

A little more advice, next time you want to quote something you should probably reference it. Bragging about the speed of your search engine is a great advertisement for Google, but it doesn't add to your credibility.

Hi,

Check out quotes at insurance brokers such as www.insurancepaylite.com, they can surely help you decide which insurance company is best for your insurance needs by comapring rates and policies to five or more insurance companies. Hope this helps.

Thank you very much for all your thoughts. I have run into problems. I had a fire in my condo. The condo association says they are only responsible for the roof. My State Farm insurance policy appears to leave me underinsured (my agent never recommended coverage increases during the last 16 years of the policy). I am left with having to replace bathrooms, drywall, all floor coverings, electrical, plumbing, mechanical, etc, throughout the condo according to the condo association. My condo insurance is only enough to cover paint and carpeting. Any advice/suggestions will be most welcome.

Sorry to hear about your trouble, Prettealady. Your story is more common than you know. I'm an insurance agent (since 1977) and it's very rare that I find condo/co-op policy that's written correctly. Most agents insure them like tenants policies, focusing on the personal property coverage (contents) and pay little or no attention to the dwelling or building limit, leaving most insureds gravely underinsured. Anyone paying (depending on area) less than $200 for condo insurance is likely underinsured.

Your options are to complain to State Farm (not the agent), your State's insurance dept, and lastly, to sue. Agents carry E&O insurance that covers Errors & Omissions. I don't know all the facts, but on the surface, it appears your agent let you down.

Good luck,

Kevin

Thank you Kevin (Finesse) for your kindness in responding to my problem. You have been a great help in leading me in the right direction. I appreciate the advice,

Linda

You're welcome, Linda. If I can be of further help, let me know.

Kevin

We just bought a house and insured with Chubb. Actually I got quotes from a couple of carriers and Chubb was significantly cheaper! It was still fairly expensive but I cut the cost significantly (about a $1000 a year) by having a 2% deductible instead of 1% deductible. Anyway, the one thing that Chubb did that I've never seen an insurer do before is to appraise the house to determine the replacement cost and that is the amount of the dwelling part of the insurance.

Hi, Kats.

Chubb does a fine job, particularly in the high end market. In addition to Chubb, most of the carriers I represent inspect all newly written homes and notifies us if there are any discrepancies from the detailed replacement calculations we do for every policy we write.

Carrying high deductibles is a smart way to save on insurance. I tell my clients to carry insurance for the things that would be difficult for them to pay for out of pocket, and self-insure the things they can afford. High deductible is a form of self-insurance.

Kevin