You probably spent a lot of time and also a lot of your savings in order to buy a nice apartment in New York City, yet prior to choosing the paint color for the walls, you may want to make sure you get the right type of insurance to protect your investment.
1. What exactly will my insurance cover?
There are 3 basic types of coverage included by a condo and co-op insurance policy, such as additions & betterments (renovations), contents and personal liability.
This is going to cover the majority of your personal property, including electronics, furniture, and clothing from perils such as an explosion, smoke, theft, fire, but also water damage caused by bursting pipes (including overflows) up to the amount you wish to insure them for. In this regard, it’s you who decides the dollar amount you’d like to insure your items for.
It’s important to keep in mind though that there are built-in internal limits for silverware, fur, and jewelry. If you’d like these to be covered in full, you need to purchase extra coverage. Also, while the policy does cover computer equipment, if you work from home, it may not be the case, so that is why it’s best to get extra coverage for business equipment.
Walls and floors (additions and/or betterments):
Your condo or co-op insurance policy is going to cover the value of any renovation work done in your unit, the built-in fixtures in your bathroom and kitchen, but also the surfaces of your floors and walls. In New York City, the price of rebuilding per sq. ft. is about two hundred dollars. However, if the apartment that needs to be rebuilt is a high-end type or a pre-war apartment, then the cost can increase to about 700 dollars per sq. ft.
Given the fact that there’s a small chance for total loss, the majority of individuals won’t consider getting insurance for the total cost of rebuilding an apartment that’s been entirely destroyed. In general, they try to strike a balance between an amount that won’t lead to financial ruin in the event the unforeseeable happens and what they can reasonably afford.
This type of coverage is going to cover you for bodily injury that your visitors/guests incur while in your home (i.e. falling down the stairs, etc) or more commonly, for damage that your pets or kids may cause to your neighbors’ property. If you live in an apartment building, then getting this type of coverage is very important.
For instance, the most popular type of claims my company processes has to do with water damage from sinks or bathtubs, sometimes even showers that have overblown into the condo below. This can cause 1,000s and sometimes tens of 1,000s of dollars worth of damage.
In most cases, condo and co-op insurance policies have you covered for up to 100 thousand dollars, but getting more is quite cheap. In fact, the difference between 100 thousand and a million dollars worth of coverage is about fifty to sixty dollars per year.
2. How much does co-op and condo insurance cost?
For the most basic of policies, you’ll need to pay between $220 and $325 dollars per year and you get 25 thousand dollars coverage for your contents, 20 thousand dollars for your floors and walls and up to 100 thousand dollars for liability claims. The truth is that these are small amounts when you think about it, so if you own a large apartment and have a big claim, it’s pretty clear that you’re going to shell out a large chunk of cash from your own money to pay for the damages caused.
A great policy that most people consider costs between $440 and $675 per year and it comes with $50,000 worth of coverage for contents, but also additions/betterments coverage and $500,000 of liability coverage. However, if you want to purchase an apartment that’s in the mid-6-figures, you may want to get more.
For instance, if you want to insure a pre-war apartment with a size of eleven hundred sq. ft, then that’s going to cost you between $1,100 dollars and up to $2,400 dollars per year, based on where you live and the expansiveness of your policy’s terms – with 100 thousand dollars of contents coverage, 300 thousand dollars of renovations coverage and one million dollars of liability coverage.
3. Are there any special insurance requirements in my building? What about my mortgage bank?
It’s recommended that you first check with your mortgage lender and also your building prior to starting to shop for insurance. Because water damage incidents are quite common in New York City, both condos and co-ops require you to get enough liability coverage to deal with them. They don’t want to have the building’s policy invoked and they certainly hate getting involved in the claims process. On top of that, if you suffer a great loss, they also require you to have plenty of coverage to rebuild swiftly.
When it comes to your mortgage lender, the requirements are going to vary based on whether you own a condo or a co-op. If you have the latter, then banks are generally okay with just seeing their names on the building’s master policy. On the other hand, when it comes to lenders, they want the condo owner to insure the built-in renovations, floors, and walls for a minimum of twenty percent of your loan’s value.
4. How big should my deductible be?
Deductibles range from two hundred and fifty dollars through twenty-five hundred dollars-and in high-value cases up to twenty-five thousand dollars. With the first few increases, you can save about 10% on your premium and after that, you’re going to get into diminishing returns.
To save on premium, you need to get the highest deductible you can afford, but also make sure not to file small claims. If you file 2 claims within 3 years the company may choose to non-renew your policy due to excess claims. In this case, you may have to purchase a more expensive insurance policy in the secondary market and wait for a few years, time in which you shouldn’t file a claim.
5. If I sublet my condo or co-op will I still be covered? How about if I want to use the apartment as a pied-a-terre, part-time?
When renting your condo for a long time (3 to 6 months) you can rewrite or modify your insurance to cover, but you have to speak to your insurance broker or carrier about it first. However, if you rent your condo to anybody, you won’t be covered in case something gets damaged.
If you do want to live in the apartment, but only part-time, the policy will still be in full effect. Just bear in mind that the condo should not be vacant, but furnished. If you have an umbrella insurance policy though, be sure to check your limits. For instance, if you live in CA, your umbrella coverage can also cover claims related to your NYC apartment, yet only if you purchased minimum 300 thousand dollars in liability coverage on your NYC’s apartment insurance policy.
6. In the event something happens to my apartment, will the insurer cover the costs for temporary housing?
Every type of condo and co-op insurance policy (in the voluntary market) has some loss of use coverage if your apartment is damaged beyond reasonable habitation by gas line explosions, smoke, water damage, fire damage, etc. Time limits may apply depending on your policy, while others only cover a specific percentage of your contents insurance.
7. Is my dog covered by my condo or co-op insurance?
Claims to dog bites are covered, but you need to inform your insurer about the fact that you have a dog. However, there are exceptions, so if you own a certain dog breed that is believed to pose higher risks, you won’t be covered.
8. Will my insurance reimburse me for assessments?
Special assessments for damage the building has suffered by a covered peril are covered by the majority of insurance policies. The only exception includes lobby renovations and elevator replacements. Yet, a major bodily injury claim or fire damage can be covered, but only if the insurance on the building is exhausted first. The majority of policies have a built-in coverage of one thousand dollars, yet it can range from five to fifty thousand dollars.
9. How can I save money on insurance (without increasing my deductible)?
For this to be possible, you need to live in a building that’s fire resistant, have a central station fire alarm system, have a security guard or a doorman.
10. What doesn’t my insurance cover?
Condo or co-op insurance doesn’t usually cover damage to the following:
- Loss of use of the apartment or damage to the apartment from rising flow waters.
- Damage from vermin and insects.
- Bites from dangerous dog breeds.
- Short term renters (less than 3 to 6 months).
- Driving rented vehicles, including Zipcars (there are though certain insurers that provide this kind of coverage).
- Intentional Acts
- Wear & Tear
Make sure you check with your local independent insurance agent to find out what coverage your policy has. Individual policies will vary significantly, especially from insurance company to insurance company.
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