The Condominium HO-6 Insurance Policy: Fannie, Freddie & FHA Required

by Rich Vetstein on April 6, 2010 · 17 comments

in Condominium Law, Fannie Mae, FHA, Insurance, Massachusetts Real Estate Law

“Walls In” Condo Unit Coverage Required By Many Lenders

A HO-6 policy is like a regular homeowner’s policy, but for a condominium unit, and with a lot more extras. HO-6 insurance policies cover the interior of the unit and personal property inside–commonly known as “studs in” or “walls in” coverage.

HO-6 Now Required By Lenders

Under the new Fannie Mae (FNMA) and FHA overhaul of condominium lending guidelines, lenders are now requiring HO-6 policies for new condo unit purchases. Sounds like common sense, but HO-6 policies weren’t always required by lenders, and many condominium unit owners were under the mistaken impression that the master condominium insurance policy covered all damage to the interior of their unit as well as damage to furniture, appliances, etc. That isn’t so. In most cases, that master insurance policy covers common areas such as the hallways, roof, basement, elevator, boiler, and common walkways, for both liability and physical damage–but not the inside of units.

Coverages

HO-6 policy benefits include:

  • Coverage for damage to personal property such as furniture, computer equipment and clothing
  • Fill in the gaps of the master insurance policy and cover losses under master policy deductibles
  • Personal liability coverage
  • Interior walls and floor coverings coverage
  • Coverage for improvements or upgrades (most master insurance policies only cover the original condition and value of the unit).
  • Usually has small deductible and fairly inexpensive

Under the new lending rules, an HO-6 insurance policy must provide coverage for no less than 20% of the condominium unit’s appraised value.

High Deductible Protection

Another benefit of obtaining an HO-6 policy is that in certain situations, it will provide gap coverage caused by the often high deductibles on a master insurance policy. These days, condominium associations have been cutting costs by increasing their deductibles, anywhere from $10,000 to even $50,000. What’s more, condominium documents often provide that the unit owner is responsible for losses falling below the deductible. A well-tailored HO-6 policy will protect you in this situation. Here is a good article about the tug-of-war on deductibles.

Loss Assessments

HO-6 policies can also provide coverage for assessments applied an individual unit due to a direct loss to the condominium. The loss must be a “peril” covered under the unit owner’s individual policy, not be levied by a governmental agency, and not be related to earthquake damage. A standard condo policy typically includes up to $1,000 in loss assessment coverage. Additional coverage can be covered for a nominal amount.

The HO-6 policy is a must have for every condominium owner!

If you need an HO-6 policy, please contact my good friend, Kate Kissane at Morrill Insurance in Sudbury, MA. Email: k.kissane@morillinsurance.com or tel: 978-443-9912. 

  • Les Hackmeister

    I’m always looking for the best coverage available for our condo HOA. I’m sending this to our insurance agent for review, comments and recommendations. Thanks for the information.

  • http://www.Smarterborrowing.com Brian Cav

    Excellent Post… and even better timing! I have a client buying a Condo in South Boston, closing the end of this month. I could not find any good documentation regarding this insurance. I will be sure to pass this Blog post along. -bc

  • Sergey

    Greate Post!
    Can somebody tell me what would e the sandard price for this insurance?
    Several agents mentioned that HO-6 insurace for 90,000 is a”special case” and gave me quota for more then $600 a year.
    Am I missing somethng
    Thanks

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  • http://www.ho6insurance.com Condo Insurance Guy

    Great post, I just found this blog. I think it’s about time that they require this type of policy. I would definitely agree to make sure to understand what your master policy covers first and then get something that works with your association’s policy so that there is no unnecessary overlap.

  • Dan

    This might be true in Ma, but it is misleading because in the state of Maryland, our condominium PAC Master Insurance policy covers the entire building as built by the builder, including walls and floors. It does not cover any betterments that the owner has done to their individual unit. Again everything is covered as built by the builder.

  • http://www.djgins.com/blog Guarino Insurance Agency

    There are master condo policies out there (in Massachusetts) that have a “all-in” endorsement that you can ad onto the master policy which will cover the inside walls and fixtures. But, you need to make sure that there is enough coverage on the building to cover this if a loss were to occur. It is difficult to tell sometimes what is and is not covered on a master condo policy. Often times the insurance company will refer to the “condo bylaws” when determining if there inside walls and fixtures are covered by the policy. Please check out or insurance blog to find out more information on master condo insurance policies.

    WWW. DJGINS.COM/BLOG

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  • http://www.condoinsurance.com CondoInsurance.com

    Very well said! Not all policies are the same which makes it even more important to compare multiple policies from different insurers. If you’re not sure how to interpret a definition, make sure you talk with an agent who can help you understand your policy. Customer service, not just price, should be important for every condo owner looking to purchase condominium insurance.

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  • Gdorealty

    I am confused, Please explain the logic of requiring a minimum coverage of 20% of the fair market value of a condominium whose contents FMV on a walls in basis is less than the 20% value of the condominium and its underlying mortgage. I have just been told by Chase, that in order to refinance my $200,000 mortgage, I would be required to obtain $267,000 in HO-6 coverage. My insurance broker has advised me that the carrier would like an explanation as to why the value of contents in my condo has increased so dramatically and would now require an inspection of the premises. Furthermore, my premium would increase substantially. 

    • Herhefner

      It’s a Fannie Mae requirement to have 20% of the appraised value as your coverage amount. All lenders require this, not just Chase.

  • Clynruss

    A lot of this information is incorrect. Just plain wrong. ho6 does NOT fill in th gaps of the master policy. They are toitally separate things.

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  • Confused in MI

    I was told by State Farm Insurance here in Michigan that they don’t issue the HO-6 policy non-owner occupied rental condo’s. The coverage for the Building on a fire policy referring to the type as a “Rental Condo Unit” was increased to 20% of the appraised value. A Certificate of Liability Insurance policy insuring the Condominium Association says that the policy provides “guaranteed replacement cost coverage back to the original specifications of the unit” but the lender says that we need an HO-6 policy regardless if it an owner or non-owner occupied unit. Which is correct?

  • Connor  Hudson

    We have this florida condominium law just last month and we all agreed how it worked for us homeowners. It’s good to know that it all matters fr everybody and HO-6 is now on the track.

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