All homeowners need to purchase homeowner’s insurance. This insurance covers damage done to the home or if someone is hurt on the property. Even homes that are within a homeowners’ association (HOA) need to get an individual policy. The HOA’s insurance will not fully cover the owner from loss.
For owners in the permanently affordable program, it is important to have enough insurance to replace their home in the case of a catastrophic event. The amount of coverage may be different than the affordable value. The cost to rebuild a home could be greater than the affordable value, which is artificially low.
Below are some questions to consider as one shops for insurance. This is not a comprehensive guide and buyers/owners are encouraged to do additional research.
- Do I need homeowner’s insurance? Yes. If damage is done to a home, it needs to be repaired. If there is a catastrophic event this could mean rebuilding the whole home. The city will not repair or rebuild an owner’s home. The HOA’s insurance may cover some repairs but not all. In addition, lenders and HOAs require owners to have insurance.
- What will homeowner’s insurance cover? This varies by policy. However, most cover for fire, smoke, theft, vandalism, and severe weather. Many also provide coverage should someone get hurt on the property. Flooding is an additional risk in Boulder. Depending on where a home is located additional flood insurance may need to be purchased.
- Does the HOA cover the insurance? No. An HOA will have a policy to cover the common areas. In some cases, this will cover some of the building structure that is shared. However, what is inside each unit is generally the responsibility of the owner.
- What is covered by the HOA’s insurance and what is the responsibility of the owner? Owners need to check with their HOA and review the HOA’s insurance policy to understand where the HOA’s insurance stops and where an owner’s insurance should start. In many cases, from the walls out is covered by the HOA and the interior is the responsibility of the owner. This could mean the owner needs insurance to cover personal property, appliances, flooring, kitchen fixtures, bath fixtures and so on. Because there are many variations, owners should check with their HOA for specifics.
- Do owner’s need flood insurance? Depending on where the home is located a separate flood insurance policy may be required. FEMA publishes maps that can help one determine the flood risk and need for flood insurance. If a particular insurer does not offer flood insurance, owner’s may be able to access the National Flood Insurance Program.
- How much coverage do I need? The dollar amount of coverage needed depends on the value of what is inside the home and the cost to rebuild. In estimating the value of the contents, one should consider the present value and also what it would cost to replace the contents (likely more than the present value). Insurance policies can be purchased to cover both of these situations. In estimating the cost to rebuild one can multiply the cost per square foot to build in this area by the size of the home. A local insurance agent, real estate agent, or appraiser can probably help determine current local building costs. Also, as explained above, in determining the rebuilding cost one needs to factor in what part the HOA may cover.
- Will the amount of coverage stay the same or change over time? Each year the dollar amount of coverage should increase. As the cost to replace items and rebuild increases so should the coverage amount. Many policies can be set up to automatically increase each year. This change will also increase the cost for insurance.
- Should owners get special assessment insurance coverage? It is highly recommended to get special assessment insurance coverage. HOA special assessments can be several thousand dollars. There is extra insurance, sometimes called loss assessment coverage, that can cover an owner’s requirement to pay for some special assessments. Generally, this coverage is limited to damage to common property or liability claims in common property. In most cases it will not cover maintenance or improvements. One should check with their insurance agent for details.
- What if someone gets hurt on the property? Injury and liability coverage is generally part of a homeowner policy. Various dollar amounts of coverage are available.
- What if the home is so damaged that it cannot be lived in while it is repaired? Insurance policies can be purchased to cover living expenses if someone is displaced from their home. If this is included in the policy, the amount varies based on the policy.
- How do I find an Insurance Agent? The city does not recommend any specific insurance company. It is good to talk with a few different agents to see what they can offer and what the costs are.
- After getting the appropriate homeowner’s insurance are there other steps to take? It is recommended owners make an inventory of their home. This will make it easier to remember what they have should they need to make a claim. This could be a written list, photos and/or videos.
This list is not all inclusive, it is meant to assist in assessing homeowner insurance needs. Buyers/owners are encouraged to do additional research.