The HOA industry has ALWAYS (at least for the entire 25 years that I've been in this industry) required that homeowners purchase their own insurance, called an HO-6 policy. It has not been until recently that the mortgage companies began requiring this same insurance policy.
To determine how much coverage you require, you'll need to define for your insurance agent WHAT you actually own. For example, if you own a condominium, then you don't own the building at all, so the coverage is based only on the interior improvements inside your home and the personal property you own. If the townhome is a unit a planned development, then you actually own the building and the land, so the coverage you'll be required to purchase will include a portion of the value of the home. Your insurance agent, however, will be able to determine the amount and type of coverage you'll need for your mortgage company.
I might add, as an HOA consultant, that even though you're first learning of this coverage in your refinance, you MUST MUST MUST have this policy in place for your home at all times. In other words, you cannot cancel the policy after the first year. An HO-6 policy will provide coverage to your home when you sustain any damage that is not covered by the Association's policy. Remember, the deductible for most HOA policies START at $5000 per occurrence, so even if there is coverage for any damages in your home, you (as the owner) will be responsible for at least the first $5000 (and possibly a whole lot more) of the cost, which can be covered by your HO-6 policy. The same holds true for anyone who slips, falls or injures themselves in your home--there's no coverage from the Association's policy for these types of liabilities.
To determine the type of coverage you'll need as well as the cost, you must talk with a licensed insurance agent. Typically, however, the cost is relatively inexpensive and most of my clients tell me that they pay only a few hundred dollars for the coverage for their condominium homes. Contact your favorite insurance agent (start with the individual who provides you with car insurance) for pricing and assistance.
Area Pro Realty-People's Choice
Many lenders now are requiring their borrowers obtain an HO6 policy since some master HOA policies do not cover the interior (stud walls in) - this includes flooring, interior walls, kitchens, bathroom, etc. You will need to carefully read through your HOA policies to make sure that it does not cover the interior. Insurance companies premiums will vary.
The lenders require 20% but you want to make sure that if the place burns down that you have enough coverage to rebuild your place.
You are more than welcome to get a quote from me. I am an independent broker which I can provide several companies to compare with.
Red Wave Insurance Services
An HO-6 policy covers the interior fixtures of the townhouse which are not covered by the master policy. Although it is unlikely you needed this when you bought your house, lenders are now requiring them. You can contact any insurance company, Allstate, State Farm, Farmers, etc. to get a policy. I might recommend you begin with your auto insurance company as they will often offer a discount for two policies.
As for coverage requirements, you need 20% with most lenders. Therefore, for a $500,000 home, you would need $100,000 worth of coverage. This should cost you about $375 - $500 per year.
Hope this helps.
David M. Setti
TurnKey Mortgage Solutions
Thanks for sharing that your home is valued at 500k.
Generally, you would want a HO-6 coverage of at least half that value to replace your
Home items as well as be able to rebuild the place in the event of a fire.
I would be surprised if you are being asked to get a 500k policy.
Be sure the insurance company you go with is AAA or AA rated.
Dave Setti, answered your question perfectly. Think of the HO-6 policy as contents. Your condo coverage covers the unit exterior and common, your Ho-6 policy covers your walls in. This includes cabinets, floors, etc. Your current provider can assist you. Or you can
call Laura Peterson