Homeowners insurance: what you need before closing on your condo or co-op

As Al Pacino famously said in The Godfather Pt 3, “Just when I think I’m out, they pull me back in!” Don’t worry, when you buy a home in NYC you won’t have to fret about swimming with the fishes. However, just when you think you’ve exhausted your bank account for a downpayment, inspection, appraisal, and numerous other costs, expect to find a year of Homeowner’s Insurance prior to closing. This price can differ markedly based on the property you are purchasing and the policy you choose. Plan to keep a few grand aside. It could be the best money you ever spent.

2 policies for a condo or co-op

If you’re buying in NYC, chances are you’re buying a condo or co-op. Their policies are different from single-family homes. Before you start shopping, you’ll want to see what is covered by your building’s policy. The Insurance Information Institute advises that condo and co-op owners need two separate policies to protect their investment:

Your own policy is for your own unit. It covers personal possessions and structural improvements. Thankfully, it will also cover additional living expenses if you are the victim of fire, theft or other disaster listed in your policy. Most insurers refer to this coverage as a “condo unit owner’s policy.”

There is also a “master policy” provided by the condo or co-op board. This covers all common areas in the building that the residents share such as the roof, basement, elevator, boiler, and walkways for both liability and physical damage.

Most insurance agents will want to see a copy of the condo’s by-laws to see what is covered in the master policy and what coverage is mandated that the residents purchase. Take note that all master policies are not uniform, so planning ahead, as soon as you get clear to close is preferable.

Liability Insurance

In a multi-unit dwelling purchasing liability insurance is a good move. The condo by-laws will tell you how much you need to purchase. This will cover damage caused to your unit by another’s — such as water leaks — or guests being injured inside your home.

Loss Assessment Insurance

Of course, you don’t like buying extra insurance just for the sake of it but you’ve seen the TV ads when a tree falls on a home or something else out of the ordinary happens, you’ll know this makes sense. The point here is, be prepared for all eventualities and don’t rely on the building’s master insurance policy to cover all common area mishaps. For example, if a crane working nearby drops construction materials onto your condo and the damage caused is $600,000 and the master policy only covers $500,000, in a 25-unit building, you, along with your fellow residents, will need to find another $4000 each. Ouch! In most cases, loss assessment coverage will cover that cost for you. It’s not very expensive and is another layer of protection.

All policies don’t need to be purchased at once

The upfront costs of home buying in NYC are painful so in order to close, so it’s fine to just get the policy the bank or condo/co-op requires you get inside your new home. When you’ve caught your breath, a month or so later you can look into additional coverage.