What Does a Master Insurance Policy Cover?

Master insurance policies provide comprehensive coverage for shared properties in common interest communities. These policies are designed for condominiums, homeowners associations (HOAs), and cooperatives, addressing the unique insurance needs of communal living. Their fundamental purpose is to insure the shared property, common areas, and overall structure of the community. A master policy complements an individual unit owner’s personal insurance, which covers personal belongings and the interior of their specific unit.

Scope of Property Protection

A master insurance policy covers the physical components and structures that constitute the collective property of a common interest community. This includes the entire building structure, encompassing exterior walls, roofing, and foundations, forming the basic framework of the property.

The policy also extends coverage to common areas and facilities accessible to all residents. This includes shared spaces such as lobbies, hallways, stairwells, and elevators. Recreational amenities like fitness centers, swimming pools, and clubhouses are also generally protected.

Beyond visible structures, the policy covers shared utilities and infrastructure within common elements. This includes plumbing, electrical systems, and heating, ventilation, and air conditioning (HVAC) units that serve common areas.

Covered Events and Liabilities

Master policies protect against various incidents and legal responsibilities that could impact the common property and the association. They typically cover damage from common perils such as fire, windstorm, hail, and lightning. Protection against smoke, vandalism, and theft within common areas is also usually included.

In addition to property damage, master policies provide general liability coverage. This protects the association from financial and legal responsibilities arising from accidents or injuries that occur in common areas. For instance, if a person slips and falls in a shared hallway or near a community pool, the master policy would typically cover medical expenses and potential legal defense costs.

This liability coverage extends to the association itself and, in some cases, can offer a degree of protection to individual unit owners for incidents related to common elements.

Understanding Different Master Policy Forms

The type of master policy significantly influences the extent of coverage for the interior of individual units, directly impacting a unit owner’s personal insurance needs. Three main forms are common, each offering varying levels of interior unit coverage. Understanding these distinctions is important for unit owners to determine their own responsibilities.

A “Bare Walls-In” policy, sometimes called “Walls-Out” or “Studs-Out,” provides the most limited coverage for individual units. This policy covers the building’s main structure, exterior, and common areas. Under this form, the unit owner is responsible for insuring everything from the unfinished walls inward, such as interior walls, fixtures, appliances, flooring, or cabinetry.

The “Single Entity” policy, also known as “Original Specifications” or “Walls-In,” offers broader coverage. It covers the building structure, common areas, and the original fixtures and finishes installed by the builder within individual units, such as standard cabinetry, basic flooring, and original appliances. Unit owners are responsible for any upgrades or improvements they make beyond these original specifications, as well as their personal property.

The most comprehensive coverage is provided by an “All-In” or “All-Inclusive” policy. This type of policy includes the building structure, common areas, and all fixtures, improvements, and additions within individual units, even those made by previous owners. Under an all-in policy, the unit owner’s primary responsibility is typically limited to insuring their personal belongings.

The specific form of master policy dictates what a unit owner must cover with their personal insurance, commonly an HO-6 policy. For example, if the master policy is “bare walls-in,” the unit owner’s HO-6 policy would need to cover the interior dwelling, including walls, floors, and fixtures. Conversely, with an “all-in” policy, the HO-6 would primarily focus on personal property and liability within the unit.

What Master Insurance Does Not Include

While master insurance policies cover significant aspects of common interest communities, they do not provide blanket coverage for everything. Understanding these exclusions is important for unit owners to secure appropriate personal insurance, typically an HO-6 policy, to avoid coverage gaps.

A primary exclusion is the unit owner’s personal property. The master policy does not cover furniture, electronics, clothing, valuables, or other personal belongings within an individual unit. Unit owners must obtain separate personal property coverage through their own HO-6 policy to protect these items from perils like fire, theft, or water damage.

Master policies also do not cover personal liability for incidents occurring exclusively within an individual unit or caused by the unit owner outside common areas. For example, if a guest is injured inside a private unit, the unit owner’s personal liability coverage, typically part of an HO-6 policy, would be responsible.

Depending on the master policy type, upgrades and improvements made within a unit by the current or previous owners, beyond original builder specifications, may not be covered. If the master policy is “bare walls-in” or “single entity,” the unit owner is responsible for insuring these enhancements. An HO-6 policy can provide “dwelling coverage” for alterations, appliances, fixtures, and improvements within the unit.

Master policies typically exclude “loss of use” or “additional living expenses.” These are costs incurred if a unit becomes uninhabitable due to a covered loss, such as temporary housing or meals. Unit owners need to ensure their personal HO-6 policy includes this coverage to mitigate unexpected living expenses during displacement.

Unit owners may also be responsible for portions of the master policy’s deductible or for special assessments. If a loss occurs, the master policy has a deductible, which can range from hundreds to several thousands of dollars, and unit owners might be assessed a share of this amount, especially if the damage originated within their unit or affects multiple units. Special assessments can be levied by the association to cover losses or deductibles not fully covered by the master policy or for major repairs that exceed the association’s reserves.

Standard master policies also commonly exclude specific perils such as floods and earthquakes. Coverage for these events typically requires separate, specialized policies, often through government programs or private insurers. Unit owners in areas prone to these natural disasters should consider obtaining additional flood or earthquake insurance to protect their property and potential special assessments related to such damages.