Who Needs Townhouse Insurance? What Policy Should I Buy?

People who live in town houses or townhomes aren't legally required to buy insurance to protect their property, but it is possible that your lender, landlord or homeowners association will oblige 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 purchase town house insurance, we highly recommend purchasing coverage, as it will protect you financially in case of disaster.

Do I need homeowners insurance for my town house?

You're not required by law to have home insurance on your town house, but there's a possibility you will need to purchase it in order to own one. If you purchased your town house using a mortgage, your lender will likely require you to have homeowners insurance. This is to protect the bank's investment, as well as your own.

Additionally, if your town house is in a condominium association or planned community, you are likely to be required to purchase insurance that meets the terms of your condo agreement. Make sure you know exactly what type of coverage is required, as well as what minimum limits are needed, so you are not caught off-guard by an unexpected expense.

Even if you aren't required to buy insurance, we recommend considering coverage, as a town house or townhome insurance policy will protect your home and your belongings in case of a disaster. It'll also cover you if you're the target of a liability claim, such as if someone is injured in your house.

What kind of town house insurance should I buy?

These different types of policies cover different parts of your home — for example, condo insurance usually doesn't cover the roof. No matter which policy you purchase, you may need to supplement your main insurance policy with extra kinds of coverage, depending on where you live: For instance, Florida town house owners might need flood insurance, while people in California may consider earthquake coverage.

What kind you need: If you rent your town house

People who rent their town houses should get renters insurance. A renters insurance policy complements your landlord's insurance policy by providing coverage for your personal property, like 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 U.S. only costs $19 per month but can pay out thousands of dollars if you ever need to make a claim.

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

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

Condo association group insurance policies typically cover any parts of the property that are owned collectively by all of the residents: This usually includes the shared hallways, roads and pathways, as well as common amenities like an elevator or swimming pool. The policy you buy should fill in the gaps to cover the property for which you are responsible. For town house condominium residents, that may include coverage for 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 and thus be covered by your association policy. Check to see what's covered by your homeowners association (HOA) group insurance before you purchase your policy.

The average cost of condo insurance is $488 per year, though the price varies significantly by state. Additionally, town house owners are likely to pay more than a typical condo owner, as town house condo coverage usually includes higher limits for your home's structure.

What kind you need: If you own your home outright

If you own your home and it is not part of a condo association, you'll need a standard homeowners insurance policy — the same as you'd buy for a standalone home. Many town houses are simply privately owned homes and aren't covered by any insurance policy except for 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.

A typical homeowners insurance policy quote is $1,445 per year on average nationwide, but coverage for town houses is usually less expensive than homeowners insurance for a standalone house in the same area. This is because town houses tend to be smaller.

How much town house insurance should I buy?

As with all forms of home insurance, you should buy enough town house coverage so that you are completely reimbursed if your home and all the property inside it are destroyed. The exact amount of town house insurance coverage you need, and the cost of that coverage, will depend on several factors:

The appropriate amount of liability coverage to get is a personal decision, 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 town houses

If your town house is part of a condo association, you'll need to make a few special considerations before you sign up for insurance. You 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 to cover an assessment. But with a town house, you are likely to be responsible for damage to your home's exterior walls, roof and even your private exterior land, like your yard. What is covered will vary from association to association, so you'll need to 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 is called an assessment. Loss assessment coverage pays for your share of those extra costs. Loss assessment coverage is a particularly good idea if your condo has a lot of common areas that are susceptible to damage or if you believe that the limits of your condo association's shared policy are too low.

What is the difference between a condo and a town house?

Town houses and condominiums are both commonly used to describe types of homes, but they aren't mutually exclusive: A town house is a type of building, and a condo is a structure of ownership. Your home could be a condo, a town house, both or neither.

Town houses

In general, a town house is a single-family dwelling that shares one or two of its walls with its neighbors. The house may have anywhere from one to five floors, with two to four being the most common. Town houses usually have a door facing the street, and they may have a small front or back yard. They go by different names in different parts of the United States: Common alternative names include rowhouse, townhome, terrace house or patio home.

It's common for town houses to have some degree of organization with their neighborhoods. These neighborhood, community or homeowners associations might include 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, each of which 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, whether that's 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.