HOA insurance also called a master insurance policy or a condo master insurance policy is the insurance your homeowners' association maintains for the building your condo is in. This policy helps pay for damage to the building's exterior and common areas, like hallways, courtyards, and more. It also usually covers liability for incidents in common areas. However, it doesn't cover condo interiors – that's a job for condo insurance.
The HOA insurance premium is paid for in part by your HOA fees.
What does HOA insurance cover?
HOA master insurance covers:
- Building exteriors that belongs to the association.
- Shared space and property that belongs to the association.
- Liability for incidents that happen in shared spaces.
So if your condo is in a high-rise that catches fire, the HOA insurance policy can cover the cost of rebuilding and repairing the structure's exterior. The types of damage master insurance covers depends on whether it's a named perils or all perils policy. The latter covers more types of damage, but both include coverage for fire, wind, theft, vandalism, and more.
The HOA policy also usually includes coverage for shared property. For example, it may help pay for fire damage to elevators, roofs, courtyards, walkways, and more. The extent to which shared property is covered depends on your homeowners association and the type of policy it buys.
The policy also usually includes liability coverage for medical and legal expenses for bodily injuries or property damage that happen in shared areas, like courtyards, swimming pools, etc.
The master policy will define where the HOA coverage stops and your condo insurance obligations begin. There are three types of HOA insurance policies:
- Bare walls in. This offers very limited coverage for the structure and common areas of the building – nothing inside of the studs. It does usually cover the space between two units, like the studs between the walls and the subfloor between the top floor and unit ceiling below.
- Walls in. This provides bare-walls coverage plus some coverage for the condo unit owners’ internal structure, including top flooring, cabinets, and countertops.
- All in. This provides coverage for the internal structure of the condo unit, including appliances and security equipment.
Because of these variations, it’s important for condo unit owners to understand their HOA insurance and find condo insurance that properly fills these coverage gaps.
How does HOA insurance work?
The master insurance policy works like any other insurance policy. The HOA pays the premium, and if there's an incident the policy covers, the HOA board files the claim. The insurance carrier will investigate the damage to determine if the HOA is liable and whether its coverage applies.
When the HOA makes a claim on its master policy, there will be a deductible just like any other insurance policy. In most cases, the HOA will then assess a pro-rated amount to each condo unit owner to pay the deductible. This is called a loss assessment.
For example, assume an association has 10 condo unit owners with a master policy that covers the structure for $1 million with a 10 percent deductible. That's $100,000. The community center next to the pool burns down and will cost $150,000 to rebuild.
This means insurance can pay $50,000 and the HOA must come up with $100,000 to meet its deductible. Each condo unit owner is responsible for $10,000 each.
HOA insurance vs. condo insurance
The master policy is the policy for the building exterior and its common areas while the condo unit owners policy – also called an HO6 policy – covers the individual unit from the walls in. It also covers the unit owner's personal belongings and liability.
