How Much Dwelling Coverage Do I Need for My Condo?

Purchasing a condo insurance plan means understanding what your own needs are for insurance and what your HOA insurance covers. It also means digging a little deeper to find the answer to the question of how much dwelling coverage do I need for my policy?

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Dwelling coverage limits are determined by several factors, including what your condo association covers and the fixtures and upgrades throughout your own condo. Plus there are several other factors outside of your control. But obtaining adequate dwelling coverage is critical as you begin your condo ownership journey. Here’s where you start and how to move forward with determining the right amount of coverage. 

What is dwelling coverage? 

A condo is a private residence within a complex or multi-unit building. A condo means you own the residence, and therefore it’s a piece of real estate. For condo owners, dwelling coverage provides coverage for your walls and inside. This includes cabinets, walls, countertops and other items attached to your condo. 

Dwelling coverage pays for repairs or rebuilding if the walls and anything inside your walls are damaged by peril events. Typically these events include:

  • Fire
  • Smoke
  • Hail
  • Wind
  • Lightning
  • Explosions
  • HVAC issues
  • Theft
  • Vandalism

Like homeowners and renters insurance, your dwelling coverage does not include events from floods, earthquakes or hurricanes. A separate policy is needed for these select peril events. 

How much dwelling coverage do I need for my condo? 

The general rule of thumb is to purchase enough dwelling coverage to rebuild your condo if it’s destroyed due to a covered peril event. 

The dwelling coverage amount should also include enough to cover items you need inside your condo, such as countertops, cabinets, appliances and the like. Your dwelling coverage is only for existing square footage, and not for any additions or upgrades you’d like to make to your condo. 

Dwelling coverage is in place to prevent you from having to pay out of pocket for all the rebuilding costs should disaster strike your condo. This includes the fixtures in your condo too, so it’s important to accurately evaluate how much dwelling coverage you need. 

If you are unsure how to determine the dwelling coverage you need, speak with your HOA and find out what other condo owners in your complex typically choose. You can also speak to a local architect or builder to give you a rough estimate of rebuilding costs. 

If as a condo owner you also own other structures, such as a detached garage or fence, then you need to add on to your policy for those. This is usually calculated at 10% of your condo’s value as a rough estimate. 

The amount of dwelling coverage you need also depends on your HOA’s master policy.

Does my master policy have dwelling coverage? 

Every condo association has a master policy. This provides insurance for the shared areas and structures outside your walls. But a master policy may have coverage extending beyond this, which is why it’s super important to thoroughly review it before purchasing your own condo policy.

There are two categories a master policy falls under:

  • Bare walls-in master policy: Covers the exterior of the walls and the condo owners are responsible for everything on the inside. Bare walls-in is the less expensive option for an HOA. If your HOA selects this, you need additional dwelling coverage for the interior of your condo and your personal belongings. 
  • All-in master policy: This covers walls, floors, the ceiling. It also covers the inside of your condo, including cabinetry, flooring and appliances. You would need personal belonging coverage to cover the rest. 

If you’re unsure if your master policy has dwelling coverage, talk to your HOA for details and then work with your agent to make sure your condo policy covers any gaps.

How to calculate how much condo dwelling coverage you need

Assuming your condo has the bare walls-in coverage, to calculate how much dwelling coverage you need, you must consider several factors. Not only do you need to estimate the cost to rebuild, but remember your insurance will pay out based on replacement value, and not what the items cost when your condo was built. 

The insurance company makes several other considerations when calculating the dwelling coverage, and you should use the same information for your own condo dwelling coverage calculator. This includes:

  • Square footage
  • County fees
  • Current building costs
  • Interior finishes
  • Labor costs
  • Building permits

If you have a mortgage on your condo, your lender likely requires you to carry dwelling coverage at least 20% of your condo’s appraised value. For instance, if your condo is worth $600,000, then the minimum required by your lender would be $120,000. 

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How do I update my dwelling coverage?

As you make upgrades to your condo, be sure to revisit how much dwelling coverage you need. Your condo should increase in value after upgrades, such as a new kitchen or updated bathrooms.  Updating your policy means you’ll have enough coverage to rebuild after a covered peril event. 

Costs of labor and building materials play a big role in how much coverage you need. As these costs increase over time, you need to update your coverage amount to reflect these changes too. 

Cost of living is another factor influencing the need for increased (or decreased) dwelling coverage. A change in real estate value over time can warrant an update to your coverage amount. 

To update your dwelling coverage, review your policy on a regular basis. You should contact your agent during your review, or anytime you complete an upgrade to your condo. 

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