Who Needs Townhouse Insurance? What Policy Should I Buy?

People who live in townhouses or townhomes aren't legally required to buy insurance to protect their property. But it is possible that your lender, landlord or homeowners association requires you to buy coverage. Depending on your circumstances, you may have to buy homeowners, condominium or renters insurance. Even if you aren't required to have townhouse insurance, it's a good idea to buy coverage, as it will protect you financially in case of a disaster.

Do I need homeowners insurance for my townhouse?

You're not required by law to have home insurance on your townhouse, but if you mortgaged the home, your lender will likely require it. This is to protect the bank's investment, as well as your own.

Additionally, if your townhouse is in a condominium association or planned community, you'll probably need to buy insurance that meets the terms of your condo agreement. Make sure you know exactly what type and amount of coverage is required, so you're not caught off guard by an unexpected expense.

Even if you aren't required to buy insurance, consider coverage. A townhouse or townhome insurance policy will protect your home and your belongings in case of a disaster. It'll also cover liability claims filed against you, like if someone is injured in your house.

What kind of townhouse insurance should I buy?

These three policies cover different parts of your home. For example, condo insurance usually doesn't cover the roof. No matter which policy you buy, you may need to add on extra kinds of coverage, depending on where you live. For instance, Florida townhouse owners might need flood insurance, while people in California may want earthquake coverage.

What kind you need: If you rent your townhouse

People who rent their townhouses should get renters insurance. This policy complements your landlord's insurance policy by providing coverage for your personal property, such as furniture, clothing and electronics. It also includes liability coverage. The structure of your home, both inside and out, is covered by your landlord's insurance. The average renters insurance policy in the United States only costs $19 per month but can pay out thousands of dollars if you ever make a claim.

What kind you need: If your property is in a condo association

People who own their townhouse but belong to a condominium association need condo insurance, sometimes referred to as HO-6 coverage. It should protect your personal property, the interior of your home and any part of your home that's not covered by the association's group policy.

Condo association group insurance policies typically cover any parts of the property owned collectively, by all of the residents. This usually includes the shared hallways, roads and pathways, and common amenities such as an elevator or swimming pool. The policy you buy should cover the property gaps for which you are responsible. For townhouse condominium residents, that may include your roof, exterior walls and possibly the land your property sits on.

The exact breakdown will depend on your condo or homeowners association. For example, a roof could technically be considered a "shared" resource. Check to see what's covered by your homeowners association (HOA) group insurance before you buy your policy.

The price of condo insurance averages $488 per year but varies by state. Also, townhouse condo owners are likely to pay more than a typical condo owner, because coverage limits are usually higher for the home's structure.

What kind you need: If you own your home outright

If you own a home that's not part of a condo association, you'll need the same standard homeowners insurance policy you'd buy for a stand-alone home. Many townhouses are privately owned homes and aren't covered by any insurance policy except the one you buy personally. If your home is not in a condo association, you'll need an insurance policy that protects the structure of your home, your personal property and the land your property is on.

The average homeowners insurance policy quote is $1,445 per year nationwide. But coverage for townhouses is usually less expensive than for a stand-alone house in the same area. This is because townhouses tend to be smaller.

How much townhouse insurance should I buy?

As with all forms of home insurance, you should buy enough townhouse coverage to be completely reimbursed if your home is destroyed, along with all the property inside it. The exact cost and amount of coverage you need will depend on several factors:

The right amount of liability coverage to get is individual But the more often you engage in high-liability activities, such as having large parties, and the more at-risk assets you have, the more liability coverage you should buy.

Special considerations for condo townhouses

If your townhouse is part of a condo association, there are a few special considerations before you buy insurance. You'll need to know exactly which parts of your building or property are owned by you and which are owned by the condo association. And the amount of coverage you need should reflect the total value of the property you own.

In a typical "apartment style" condominium, you might only need a few thousand dollars' worth of coverage to pay for damage to your home's interior and possibly cover an assessment. But with a townhouse condominium, you're likely responsible for damage to your home's exterior walls, your roof and even your private exterior land like your yard. What's covered will vary from association to association, so check with your HOA to find out what level of coverage you need.

One type of insurance worth special consideration for condo owners is coverage for assessments. If there's damage to your condo's common property that exceeds the limits of your association's shared coverage, the extra expense is split evenly among all residents. This split is called an assessment. Loss assessment coverage pays for your share of those extra costs. It's a particularly good idea if your condo has a lot of common areas that are susceptible to damage or if you think the limits of your condo association's shared policy are too low.

What is the difference between a condo and a townhouse?

Townhouses and condominiums are commonly described as types of homes, but they aren't mutually exclusive: A townhouse is a type of building, and “condo” refers to ownership. Your home could be a condo, a townhouse, both or neither.

Townhouses

In general, a townhouse is a single-family dwelling that shares one or two of its walls with the neighboring house. It may have anywhere from one to five floors, with two to four being the most common. Townhouses usually have a door facing the street, and they may have a small front yard or backyard. They go by different names across the United States. Common names include row house, townhome, terrace house or patio home.

It's common for townhouses to have a neighborhood, community or homeowners association. It might oversee shared maintenance and landscaping, as well as rules about how homeowners can decorate their property. A condo association is one type of this organization.

Condominiums

A condominium refers to a style of homeownership where a shared complex contains multiple units, and each is owned by a different person. A condominium may be made up of several apartments in a single building or several independent buildings. The common areas of the property, such as the hallways and exterior walls of a single building or the shared grounds of a larger complex, are paid for (and insured) by everyone who lives in the condo complex.