Does HOA Insurance Cover Your Home or Just Common Areas?

Homeowners Associations (HOAs) manage shared communities, from condominiums to planned developments, establishing rules and maintaining common areas for residents. A frequent question for homeowners in these communities concerns insurance coverage: does the HOA’s policy protect individual homes, or is separate coverage necessary? Understanding the distinction between HOA master policies and personal homeowner insurance is important for safeguarding one’s property and financial well-being.

The HOA Master Insurance Policy

An HOA master insurance policy is purchased by the homeowners association to cover the entire community. This policy primarily protects shared spaces, amenities, and the overall structure of the buildings within the community. Its purpose is to safeguard the collective assets of the association and provide liability coverage for incidents occurring in common areas.

The extent of coverage provided by an HOA master policy varies depending on its type, which is outlined in the HOA’s governing documents. One common type is “Bare Walls-In” coverage. This policy covers only the exterior structure of the buildings, shared common areas, and general liability for the association. Under a bare walls-in policy, the unit owner is responsible for insuring everything from the studs and drywall inward, including fixtures, appliances, and interior finishes.

Another common type is “Original Specifications” or “Single Entity” coverage. This policy expands on bare walls-in by covering the exterior structure, common areas, and the interior of the units as they were originally built. It includes standard fixtures, flooring, and basic cabinetry, but it does not cover any upgrades or personal belongings added by the homeowner.

The most comprehensive option is “All-In” or “All-Inclusive” coverage. This policy covers the exterior, common areas, and all permanent fixtures within the units, including improvements and upgrades made by the owner. Even with an “all-in” policy, a homeowner’s personal belongings are still not covered.

Beyond property damage, HOA master policies include general liability coverage. This protects the HOA against injuries or property damage in common areas, such as a slip-and-fall accident near the community pool or in a shared hallway. This liability protection extends to the association itself and its board members for their management decisions, but it does not cover the personal liability of individual unit owners.

What is Not Covered by HOA Insurance

While an HOA master policy provides broad coverage for the community’s shared elements, it does not cover everything an individual homeowner needs. A significant gap in coverage is personal property; the HOA policy never covers a homeowner’s belongings, such as furniture, electronics, clothing, or other personal items.

The extent to which the unit’s interior is covered depends on the specific type of master policy. Even with “Original Specifications” or “All-In” policies, there are limitations. An “Original Specifications” policy will not cover upgrades or enhancements made to the unit’s interior beyond its initial construction, leaving the homeowner responsible for those improved elements. With a “Bare Walls-In” policy, the homeowner is responsible for nearly everything inside their unit, from the drywall and paint to all fixtures and finishes.

Personal liability is another area where the HOA policy’s coverage is limited. While the HOA’s policy covers liability in common areas, individual homeowners need their own policy for incidents occurring within their unit or for liability not covered by the HOA’s general liability. If a guest is injured inside a homeowner’s unit, the HOA’s policy would not provide coverage for that incident. If a unit becomes uninhabitable due to a covered loss, the HOA policy does not cover the homeowner’s temporary living expenses. These “loss of use” or “additional living expenses” are the homeowner’s responsibility.

Homeowners may also find themselves responsible for a portion of the HOA’s master policy deductible. Depending on the HOA’s governing documents and the source of the damage, the homeowner might be assessed a share of the master policy deductible, especially if the damage originated within their unit. HOA master policy deductibles can range from $2,500 to $10,000, and sometimes even higher, such as $25,000 or a percentage of the insured value. This financial responsibility can be passed on to unit owners through a special assessment.

Your Individual Homeowners Insurance

Given the limitations of an HOA master policy, an individual homeowners insurance policy is necessary to cover the gaps. For condominium or co-op unit owners, the standard policy designed to complement the HOA’s coverage is an HO-6 policy, known as condo insurance.

An HO-6 policy provides coverage for personal property, protecting a homeowner’s belongings such as furniture, electronics, clothing, and other valuables against damage or theft. This coverage ensures that even if the building’s structure is repaired by the HOA’s insurance, the homeowner’s personal items can be replaced.

The HO-6 policy also includes dwelling or unit interior coverage, covering the interior structure of the unit, including walls, flooring, ceilings, and built-in fixtures.

This coverage is important for units with “bare walls-in” HOA policies, filling the gap from the studs inward. For units under “original specifications” or “all-in” policies, it covers upgrades, improvements, and the deductible portion of any claim.

Personal liability coverage is a component of an HO-6 policy. It protects the homeowner if someone is injured within their unit or if they accidentally cause damage to someone else’s property. This offers a layer of protection beyond the HOA’s general liability.

HO-6 policies include “loss of use” or “additional living expenses” coverage. If the unit becomes uninhabitable due to a covered peril, this coverage helps pay for temporary housing, meals, and other increased living costs until the homeowner can return to their unit.

A feature of an HO-6 policy for HOA members is loss assessment coverage. This coverage helps pay for special assessments levied by the HOA for shared losses that exceed the master policy’s limits or for the master policy’s deductible.

Understanding Insurance Claims and Responsibilities

When damage occurs in a community managed by an HOA, determining which insurance policy is responsible for coverage involves understanding the interplay between the HOA master policy and the individual homeowner’s policy. The process begins by reporting the damage to the HOA. If the damage primarily affects personal property or the interior of a unit, the homeowner should also report it to their individual insurer.

The key to determining coverage lies in identifying the source and extent of the damage. The HOA’s master policy would likely be primary for structural repairs to common elements. The homeowner’s HO-6 policy would be responsible for personal belongings or interior finishes not covered by the master policy. This distinction is important, as the HOA’s Covenants, Conditions & Restrictions (CC&Rs) and bylaws specify the division of responsibilities for repairs and insurance claims.

Deductibles also play a role in claims. The HOA’s master policy will have a deductible, and depending on the community’s governing documents, unit owners might be responsible for a portion of it. A homeowner’s loss assessment coverage within their HO-6 policy can help mitigate this financial burden.

Ultimately, the HOA handles repairs covered by its master policy. Conversely, the homeowner is responsible for repairs and replacements covered by their HO-6 policy, which includes their personal property, interior unit damage beyond the HOA’s scope, and any applicable deductibles.

Homeowners should review their HOA’s CC&Rs and bylaws, as these documents dictate the specific insurance requirements and responsibilities for both the association and individual unit owners. Consulting with an insurance agent knowledgeable about HOA community policies can help ensure adequate individual coverage and a clear understanding of the claims process.