As a Realtor serving Ocean City MD and the surrounding areas I am often asked about property insurance. As with all real estate purchases, obtaining adequate property insurance will be a crucial step. Being in a coastal community we are susceptible to hurricanes, nor' easters and flooding in addition to all of the other potential hazards that come along with home ownership. Regardless of whether it is your primary home or second home real estate in Ocean City MD you want to ensure that you have adequate coverage. The type of property you purchase and your intended use of the property will ultimately dictate what type of coverage and policies that you will need to put in place.
Standard Home Owners Insurance
Standard Ocean City home owners insurance, also known as hazard insurance, combines various personal insurance protections including losses to ones home and its contents, liability coverage for any accidents that may occur, loss of use and subsequent living expenses and loss of personal possessions. Your standard home owners insurance policy requires that one of the named insured occupies the home as a primary residence. The cost of home owners insurance is typically determined by the costs that would be involved to rebuild the home in the event that a loss occurred and any additional insurance riders/protections that you have in place, such as flood insurance. A majority of insurance providers outside of our area, such as the one that has your primary residence policy, will not insure real estate in coastal areas. You will likely need to go with a local Ocean City MD insurance company and I would be glad to assist you with this. This is also beneficial in the event that there is a problem in that they are local and are familiar with claims that arise from storms, flooding, rental damage, etc. Standard home owners insurance policies would apply to Ocean City single family homes, Ocean Pines homes, West Ocean City homes and any other properties that are not a part of a condominium association. There are separate policies and coverages for properties that are part of a condo association, second homes or investment properties that you will find outlined later in this article.
Needless to say with our market area being surrounded by major bodies of water, flood insurance is essential to have in place for a majority of properties in the area. Flood damage coverage is not included in your standard insurance policy and a separate policy is required to protect your Ocean City MD real estate investment. This insurance is typically obtained through a rider policy on the home owners insurance policy that you have in place. This makes it much easier in the event that there is a problem in that you will only have to deal with one insurance company as opposed to two. Flood insurance costs will be dictated by the particular flood plain the property lies in and the overall design and construction of the home, condo or town home.
Ocean City Condo Insurance
In a majority of situations when you buy a condo or town home there will be a master insurance policy in place that will cover your fire, flood, hazard and general liability insurance through the condo or home owners association. The cost of this makes up the bulk of the condo fees that you see quoted on the Ocean City MD real estate listings. As an example, if a hurricane were to hit Ocean City MD and destroy the building that your unit is in the master insurance policy would cover all of the costs of rebuilding the original structure and the common areas. What this policy won't cover is your personal items, furniture and any improvements that you have made above and beyond the original build quality. The coverage for this is known as content insurance or an HO6 policy. When you purchase a property that operates under this scenario you will receive a copy of the insurance policy that is in place so that we can review it and ensure that there is proper coverage to protect your investment.
Content Insurance/HO6 Policy
An HO6 policy, also known as content insurance, will cover all of your personal items such as furniture, electronics, clothes, jewelry, etc. It will also cover any improvements you have made to your property above the original construction. For example, your Ocean City condo was originally constructed with laminate counter tops and you put in granite counter tops and something happens to the building and it needs to be reconstructed. The master policy reconstruction that would be covered through your Ocean City condominium fee and master insurance policy would include laminate counter tops; however your HO6 policy would then kick in and cover the costs associated with putting your granite counter tops back in. HO6 policies can also cover any gaps in insurance coverage that may arise between the coverage a mortgage lender may require and what is in place through the master policy. Mortgage lenders typically want to see coverage in place for 80% of the appraised value of Ocean City condos and Ocean City homes. HO6 policies are relatively inexpensive considering the valuable items they cover. As with other insurance coverage it is best to get it through the same company that has the master policy on the building.
If Your Ocean City Condo Caused the Problem
MD law now allows condo associations to charge the condo unit owner the master insurance policy deductible in the event that their property caused the problem that led to the claim. For example, if a pipe breaks in your property and subsequently floods the units below yours, you will then be responsible for paying the insurance deductible, which can be as high as $5000. There is insurance coverage available for this and you will want to double check your home owner's coverage to ensure that you have it in place.
Rental Property Coverage
If you intend to rent your property you will want to ensure that you have proper insurance coverage. In the event that a renter slips and falls in your unit or injures themselves in some other way the liability potion of your typical home owners insurance policy will not cover it. In order to have proper coverage for this you will need to have a separate policy known as "Rental to Others" coverage. This is a relatively inexpensive policy and can be purchased as a rider to you master insurance policy.
Umbrella Liability Coverage
In the event that you have multiple rental properties or extensively rent your current property then you may want to look into an umbrella liability coverage policy. This coverage will protect you against additional legal claims after the limits on your primary liability coverage have been exceeded. In the words of long time Ocean City insurance broker Reece Cropper with IMG Insurance, " In my opinion umbrella liability coverage is probably the single most overlooked essential coverage there is." This coverage is very inexpensive considering the additional coverage and peace of mind that it can provide.
Like vehicle insurance, home owners insurance coverage is likely something that you will never make a claim against, but in the event you need to it is a great thing to have. My home was struck by lightning a couple of years back and it fried my entire home theater system. My home owners insurance coverage covered the replacement of everything and all I had to pay was the relatively small deductible. Feel free to contact me directly anytime should you have additional questions regarding property insurance or anything else concerning real estate in Ocean City or the surrounding areas.
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