Insurance for Townhomes: How to Choose the Right Coverage

Mar 6, 2024 | Personal Insurance

For those making the move to a townhome, understanding the nuances of homeowners’ insurance is a crucial (and potentially confusing) first step. Unlike traditional single-family homes, townhomes come with a variety of unique considerations, especially when it comes to selecting the right insurance policy to protect your investment. 

One of the most significant distinctions lies in the type of insurance policy needed: the HO6 versus the HO3. This difference isn’t just in numbers but in the coverage scope, responsibilities, and the understanding that, typically, townhome residents do not own the building or surrounding property itself. 

Think you’re ready to live the townhome life? This post will get you up to speed on the basics of insurance for townhomes, including finding coverage that’s the right fit, not overpaying for unnecessary coverage, and knowing when it may be a good idea to supplement with another policy. 

HO3 Vs. HO6: Know Your Policy

These two common types of property insurance differ in some fundamental ways. Let’s explore what they are and who stands to benefit most from the different types of coverage they offer.

HO3 Policies

An HO3 policy — most commonly associated with single-family homes — offers comprehensive coverage. It typically protects the structure, personal property, and the owner against liability. This broad type of coverage is a great fit for people who own both their dwelling and the land it occupies. 

For example, one of the main benefits of HO3 coverage is its comprehensive protection for structures on the property beyond just the main house. If the covered property includes a detached garage, shed, or gazebo, HO3 policies typically cover these structures under what’s known as “other structures” protection. This comprehensive coverage gives the property owner peace of mind, knowing that their investment is entirely protected, not just the parts within the main living area. However, the dynamics shift considerably with townhomes.

HO6 Policies

HO6 policies are intended for condominiums and townhomes. While you might own your individual unit, the building and common areas are generally under the jurisdiction of a homeowner’s association (HOA). HO6 policies seamlessly adapt to these situations, focusing their coverage on the policyholder’s interior space and personal property while leaving the external building coverage to the HOA’s master policy.

HO6 homeowners’ insurance commonly includes coverage for improvements and alterations made within a unit. If an owner decides to upgrade the kitchen or install custom built-in features, an HO6 policy can cover these enhancements, something not typically covered under the HOA’s master policy. 

The 3 Key Differences Between HO3 and HO6 Contracts

Understand the following key differences to make sure you are adequately protected and not overpaying for unnecessary coverage.

Building Ownership

With a townhome, you typically own from the “walls in,” not the exterior of the building or the land it occupies. This distinction is where the HO6 policy protects exactly what you need with tailored coverage.

Coverage Scope

An HO3 usually offers extensive coverage for the structure, which is less of a concern for townhome owners who need the HO6’s focus on interior spaces and personal belongings.

Liability Coverage and More

Both policies offer liability protection and coverage for additional eventualities, but HO6 policies specifically focus on the unique risks that townhome living presents.

Choosing the right insurance for your townhome may involve understanding your HOA’s master policy. What it covers can significantly impact your decision on supplemental coverage through an HO6 policy. For instance, if the master policy is “all-inclusive,” covering fixtures and installations, your personal policy may be able to lean more towards property and liability coverage.

For those considering a townhome, assessing the value of your personal property, the potential need for flood or earthquake insurance, and the benefits of umbrella insurance may need to be a part of the conversation. 

Eber & Associates: Covered Through Life, For Life

At Eber & Associates, we’re dedicated to helping you understand the complexities of insurance for townhomes. With expertise in everything from HO6 policies to comprehensive coverage options, we’re here to make sure you’re covered through life, for life.
To learn more about how we can assist with your townhome insurance needs and explore additional resources to protect your investment, visit us at Eber & Associates.