What Is an HO6 Policy?

Michael Schwarz, President

SYMS Insurance Agency

The Lay of the Land

If you live in a condo or a co-op, at some point you’ll probably be required to buy a homeowner’s insurance policy (also known as an HO6 policy). What you may not know is that there are many people who don’t have active homeowner’s insurance policies. How can that happen?

If you have a mortgage on your co-op or condo unit, the bank will require you to have insurance at all times. If your insurance is going to lapse, they’ll send you a notice. And if you don’t send them proof of insurance or a renewal, they will place insurance on your unit, and that will be quite expensive. So most people who have a mortgage have insurance.

The problem is people who don’t have a mortgage – either they bought their unit with cash, or they bought it years ago and have paid off the mortgage. And they don’t want to pay the extra $500 or $1,000 a year to insure their unit.

Now What?

Why is this important? I’ll give you an example that happened to me at a condominium association in Fort Lee, New Jersey. One of the unit-owners left a bathtub on overnight, and it flooded into the two floors beneath it. The claim was significant. Thank goodness, he had homeowner’s insurance. We requested that his insurance company get involved, and it is going to handle the claim and pay it from start to finish. Our condominium association’s policy does not come into play, and therefore there will not be an increase in our premiums next year because of the claim. If we shop it to another market next year – as we do every year to see if there’s a better price – there will not be any claims on the loss history. That’s very good.

If this unit-owner had not had coverage, our insurance would have had to pay the claim, and that would have increased premiums for our association, which would have trickled down to the unit-owners. They would have to pay increased premiums, and they’re not going to have that many options when it comes time for shopping the renewal.

This leads to a very important point: boards need to be certain that the unit-owners or shareholders in their buildings have continuous coverage from an HO6 policy. Speak to your property manager today about it. Make sure that he or she has a system in place to follow up, so that every single unit has an active HO6 policy at all times.