If you own your home without a mortgage, you may legally choose whether or not to purchase homeowners insurance. That being said, we strongly recommend that you insure your home. Insurance can give you protection against losses due to fire, water damage, natural disasters, and even theft. The risk of losing all your belongings and your home with no financial safety net is truly not worth avoiding insurance payments. While costs vary from person to person and company to company, the average cost of homeowner’s insurance is about $300 a year.
Owners of condominiums pay monthly fees that cover costs for the entire association, including a required Master Insurance Policy. The Master Insurance Policy is owned by the condo association, not by individual unit owners. Master Insurance covers the association’s general liability (such as payment of hospital bills if a neighbor slips on an icy walkway), and damage to common areas (such as the roof, elevators, hallways, and yard). Every Master Insurance Policy is different, so it’s important to read that policy closely and understand what’s covered. We recommend asking if the policy includes HO6 coverage, which is a desirable “wall in” policy.
The condo association's Master Insurance Policy doesn't cover you completely, however. You still need to purchase an individual unit owner’s insurance policy. This individual policy can cover your jewelry, electronics, furniture, and so on from damage or theft. It can also cover bills if a visitor gets injured while in your home. Furthermore, depending on the Master Insurance Policy, it may need to cover items such as counters and carpets. Remember, the Master Insurance Policy is association-wide, so it covers the common hallway from water damage, but not your coffee maker or your heirloom rug. Condo associations nearly always require individual owners to purchase coverage for their units, but even if they don't, our recommendation is to buy the unit insurance. As with homeowner’s insurance, the average price for a year’s coverage is about $300.
If you’re like the majority of homeowners in the US, you’ll take out a mortgage to buy your home. If you have less than 20% for your down payment, you will likely be required to buy private mortgage insurance (PMI). If you want to dive deep into the numbers and specific scenarios, read our blog on it here. The main takeaway is that if you’re borrowing money from a bank or broker, they want to get paid no matter what happens to your financial situation; thus, they may require that you buy PMI. That policy will repay the lender even if you default on your mortgage payments.
Finding Coverage in Massachusetts
It’s important to know that home sellers and insurers may not reject your application because of race, color, religious creed, national origin, sex, age, ancestry, sexual orientation, children, marital status, veteran status, or the receipt of public assistance or disability. However, the company will research the home you’re buying and ask you a lot of questions about it. They will decide whether to offer you a policy, and the price of that policy, based on their research and your answers. This process is called underwriting and takes from a few days to several weeks to complete.
We recommend that you shop around and compare prices for homeowners insurance, individual condo unit insurance, and PMI. You may consider bundling your home insurance with your auto insurance, which generally saves money. Furthermore, we recommend that condo buyers get a quote from the same company that provides the Master Insurance Policy. That way, if there is ever a question of which policy is responsible for payment of a claim (the association or the unit owner), one company can’t put the onus on another company…because it’s the same company! This minimizes headaches, time, and possibly money associated with a contentious claim.
A few of our preferred insurers in alphabetical order:
If you want to read more about Massachusetts-specific insurance information and requirements, try Mass.gov’s FAQ page here, or a more general overview here.
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