Inserts can be installed either way correctly. If the exterior trim is not being capped It is often done from the inside.I'd prefer to do it this way on a 2nd story myself. Caulking is usually done on the inside if the trim is painted. It could be done either way with stained trim depending on how tight it fits to the window, typically I do not.

+1 to Todd's feedback.

Your neighbor is incorrect in this case.

If they don't allow capping, your installers probably pulled the interior stops and set them from inside to out and into the exterior stop.

Your contractor did it right.

Thanks for your input. I feel better now-;). I do have a couple of questions though.

Question: shouldn't the outside of the window be caulked as well? The window exterior trim is white.

The space where the hardware goes for my mini blinds seems more narrow than before. I haven't put up the blinds yet but can see that I'll need to make some new holes. Is this the case with new windows? Is not that big of a deal but would be in my living room as I have custom blinds and it would be too expensive to replace them for getting new windows.

Again, thanks so much for your knowledge..

Thanks for your input. I feel better now-;). I do have a couple of questions though.

Question: shouldn't the outside of the window be caulked as well? The window exterior trim is white.

The space where the hardware goes for my mini blinds seems more narrow than before. I haven't put up the blinds yet but can see that I'll need to make some new holes. Is this the case with new windows? Is not that big of a deal but would be in my living room as I have custom blinds and it would be too expensive to replace them for getting new windows.

Again, thanks so much for your knowledge.

The space for blinds could have gotten smaller especially if they were casement windows or even double hung windows that did not have a pocket to sit in.Full frames could have changed this as well.
What type of windows were installed?
Did they need to make new trim for the inside and outside?
What brand were they? (just curious)
Pictures always help, inside and out if possible.
A high quality sealant should always be used on the outside.
When there is no pocket to install the window in and new trim is needed I always try to push the window out as far as possible so the interior trim can be as wide as possible and don't like to use quarter round on the interior.
Do your windows look to be installed the same as your neighbors?

I have double hung windows. Both top and bottom tilt out for cleaning. They seem to be good windows but the true test will be this winter. Both bedrooms are really cold in the winter and frost has even gotten inside of the bottom of the window because it didn't shut all the way.

I'd rather not say the name of the windows 'only' because I don't want to hear any bashing about them-;). I can say that they have not been mentioned on this site to my knowledge. I live in a condo and did not want to spend too much on windows.

Here's a picture of them. Not sure you can tell much about them though. I'm just so delighted that I can clean the outside of them as I'm on the 2nd floor. Love that I can open from the top if I choose to do so. My old windows were 25 yrs old.

I know my condo assn had some restrictions and the window co. had to follow them. If I really like them after a year, I will get the rest of my condo done with new windows.

What's the difference between:
New construction windows
Replacement windows
Inserts

When they tear out the old frame, aren't they considered 'new' and not replacement? Somebody referred to Inserts..? Aren't they basically the same type of window? Or maybe not?

Thanks again

New Construction = full tear out of old frame and re-install of new unit with nailing flange, trim (if not drywalled opening), flashing, etc.

Insert & Replacement = pulling of the stop and installing of the unit inside the old frame and preserving the trim.