Becoming a real estate agent is not the most difficult process in the world, and the opportunity is open to almost anyone. However, that does not mean the job itself is easy. On the contrary, there is a huge difference between a good agent and a bad agent. Good agents need to know a lot about a range of different topics, each of which has endless implications and nuances.
But even the best realtors cannot know everything. The most important topics they need to keep up with include the ups-and-downs of the local housing market, the mortgage rates available, and the changing legal processes required to buy or sell a home. Insurance, however, tends to be left for last.
This is why misunderstandings occur and buyers can be led astray. It happens often with HO6 insurance. HO6 insurance refers to the insurance you get on a unit in a condo you own. It works differently to homeowners insurance, as condo owners only own what is within the outer walls.
Realtors can get HO6 insurance completely wrong, either by dismissing it entirely or undervaluing it, so that the owner of the condo is not fully covered.
HO6 insurance does not compare to homeowners insurance
One of the reasons agents do not think HO6 insurance is important is because it is worth exponentially less. When you buy a home, you need insurance to cover the property as well as the contents. However, when you buy a condo you do not own the building itself. As such, if the building burns down, you are not on the hook to pay for rebuilding.
Realtors therefore leave the insurance up to the owner or owners of the entire condominium. They may not fully understand that this insurance does not cover the contents of individual condo units.
Contents are undervalued
There is another issue that some real estate agents get wrong. That is that they undervalue the amount the condo insurance should cover. To be fair, this is something that happens with all types of home insurance. It is frighteningly common. So much so that an estimated 60% of homeowners have insurance that is undervalued by an average of 17%.
Considering that this undervaluing is due to a misunderstanding of the rising and falling costs of materials and labor, this is only set to get worse. Inflation is hitting all-time highs in 2022, meaning that insurance payouts are not going to come anywhere near to covering replacement costs if it does not account for this.
Oversight is to blame
When discussing insurance, the tendency is to assume that insurers benefit from mistakes made by customers or realtors. While that may sometimes be true, in the case of undervaluing condo insurance, it almost certainly is not. Insurance companies lose out on more expensive premiums. Homeowners lose out when claiming down the line. Realtors don’t have any stake at all in this.
In other words, no one is benefiting and it is therefore likely that no one is to blame, at least in terms of malicious intent. It is an issue of oversight more than anything else.
That does not make it any more problematic. Ultimately, if you own a condo and you do not have HO6 insurance or your insurance is undervalued, you can find yourself struggling to replace what you lose if a fire, theft, or other insured loss occurs.
HO6 insurance is crucial for all condo owners. Unfortunately, realtors have a lot of hats to wear and can end up neglecting certain aspects of the experience of purchasing a home. When it comes to insurance, each condo or homeowner needs to make sure that they know what they need, as they can lose out tremendously if they fail to get the right insurance.
