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4 reasons you need co-op or condo insurance BEFORE you close the deal

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One thing that may not be on your pre-apartment buying checklist but should be: Buying co-op and condo insurance.

Jeff Schneider of Gotham Brokerage says those embarking on the process of buying an apartment should have their insurance coverage start on the estimated closing date that's provided by the mortgage bank or the co-op or condo board.

If you don't wind up closing then, it's no big deal, he says. "It's an easy process to cancel and reissue a policy," he says. "There are no charges or penalties involved."

Note: If you're not planning on living in the apartment soon after closing, whether because you're renovating or for another reason, you'll need to alert your insurance company of that. "You may need a different type of property in that case," he says.

Below, the top four reasons you need to get your insurance sorted BEFORE you close the deal:

1. Your mortgage lender requires it

In order to qualify for a mortgage for your co-op or condo, your lender will likely require that the building you're looking to buy in has a master insurance policy, which will cover the exterior and common areas of the building, as well as the concrete "box" of your apartment. (See also A Guide to Getting the Best Coverage and Rates on Co-op and Condo Insurance and 10 Questions to Ask Before Buying Insurance for Your Co-op and Condo.)

But the lender also usually insists that you have your own policy covering the interior structure of the apartment, which the aforementioned master policy does not cover. Banks often will not schedule a closing without proof of insurance coverage, Schneider says. 

2. The co-op or condo association may require insurance even if your bank doesn't

A co-op or condo association will often insist you provide proof of insurance coverage prior to closing, sometimes even requiring it prior to a board interview as part of the board package, says Schneider.

"We see that requirement much more than we used to," says Schneider. "They want to know that you have interior coverage to rebuild or repair the apartment in case of a claim."  Meaning: If the tub overflows and damages the Warhol in the apartment beneath you, they know you can handle (and pay for) it. 

Also, if you have a dog, some boards will require you have personal liability insurance too, in case Fido bites a neighbor. And, Schneider adds, "if you're doing work on the apartment, they'll require that your general contractor has liabilty insurance and you have personal insurance, too," he says. (See 5 Renovation Fiascos Your Insurance Will Pay For.)

Schneider adds that more condos tend to require you have insurance than co-ops, while for co-ops, the requirement usually comes from the bank.

3. Even if the bank and/or building don't require it, having it can make you look good to the board

Showing up with a board package complete with insurance policy information shows your (hopefully) future neighbors that you'll be a responsible neighbor, and it can help them breathe a communal sigh of relief to know there funds to handle any damage you inflict on others -- or others inflict on you. 

4. Do it early and you won't forget

Things get busy after you buy an apartment -- you need to furnish it, move in and a whole lot more. Getting the insurance checked off early means you're more likely to get it done.

"People often forget once they've bought the apartment, or they mistakenly assume the building's master policy will cover them," says Schneider.  "That can be a very expensive mistake." For a sense of how expensive, see The Top 3 Apartment Insurance Claims in NYC, from $2,500 to $150,000.


Jeff Schneider is the president of Gotham Brokerage Co., Inc., an insurance brokerage that has been serving NYC renters, co-op and condo owners for over 45 years. For a free quote, click on over to Gotham Brokerage or give them a call at 212-406-7300.

More from Gotham Brokerage:

The top 10 questions to ask before buying insurance for your condo or co-op

Co-op and Condo Insurance: A guide to getting the best coverage and the best rates

4 insider tips for big savings on your apartment insurance

Apartment insurance coverage for mold? Here's what you need to know

The top 3 apartment insurance claims in NYC

How to file a claim on your apartment insurance--the right way

There's an apartment INSURANCE blacklist too. Here's how to stay off of it.

The ultimate co-op and condo insurance checklist

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