What Is a Condo Master Policy and How Does It Work?

A condo master policy is an insurance agreement for condominium associations, covering shared elements and the overall structure of a complex. It protects common areas and the building itself against various perils, distinct from individual unit owner insurance.

The condominium association, often managed by a homeowners’ association (HOA), is responsible for purchasing and maintaining this master policy. Funds for this insurance are typically collected from unit owners through regular association fees. This collective approach to insurance ensures that the structural integrity and shared amenities of the property are protected, benefiting all residents.

The master policy generally covers the building’s exterior, including the roof, walls, and foundation, and common areas like hallways, lobbies, fitness centers, and swimming pools. It also extends to structural components within individual units, though coverage varies based on the specific type of master policy.

Types of Condo Master Policies

Condo master policies are generally categorized into three main types, each defining a different scope of coverage for the interior of individual units. The “bare walls-in” policy, also known as “studs-in” or “walls-in,” provides the most limited coverage for the unit’s interior. Under this policy type, the association’s insurance covers only the structural components from the bare walls, floor, and ceiling, typically up to the drywall. This means fixtures, built-in appliances, flooring, cabinetry, and interior finishes within a unit are not covered by the master policy.

A “single entity” master policy offers a broader scope of coverage compared to “bare walls-in.” This type of policy generally covers the basic building structure and standard fixtures within the individual units, such as original appliances, standard flooring, and bathroom fixtures, as they were installed by the builder. It essentially covers the unit as it was originally designed and constructed, excluding any upgrades or personal property. The intent is to return the unit to its original, unimproved state after a covered loss.

The most comprehensive coverage is provided by an “all-in” or “all-inclusive” master policy. This policy type covers the building’s structure, common areas, and most fixtures and improvements within individual units, including any upgrades or additions made by the unit owner. If a unit owner installs new flooring or high-end appliances, an “all-in” policy would typically cover these improvements in the event of a covered peril. While this offers extensive protection, it is less common due to potentially higher premiums and the detailed valuation required for individual unit improvements.

Coverage Scope and Your Individual Policy

The condo master policy primarily covers the physical structure of the condominium building and its common elements. This includes shared spaces such as the roof, exterior walls, foundations, elevators, and amenities like clubhouses or pools. Depending on the specific type of master policy, it may also cover certain interior components of individual units, such as the original structural elements, plumbing, and electrical wiring up to the point of connection. The master policy protects these assets from covered perils like fire, wind damage, and vandalism.

However, the master policy does not cover everything within a unit, which necessitates individual insurance for unit owners, commonly known as an HO-6 policy. A gap in master policy coverage is personal belongings, including furniture, clothing, electronics, and other movable items. These personal possessions are the responsibility of the unit owner and require an HO-6 policy for protection against theft, fire, or other covered losses.

The master policy typically does not provide personal liability coverage for unit owners. If a visitor is injured inside a unit or if a unit owner accidentally causes damage to another unit, the master policy will not cover the associated legal and medical costs. An individual HO-6 policy includes personal liability coverage to address these potential claims, offering financial protection to the unit owner.

The master policy does not cover additional living expenses. If a unit becomes uninhabitable due to a covered loss, the master policy will not pay for temporary housing, food, or other increased costs incurred by the unit owner while repairs are underway. An HO-6 policy typically includes coverage for additional living expenses, providing financial relief during such times.

Key Financial Aspects

A financial aspect of a condo master policy for unit owners is the deductible. This is the amount the association must pay out-of-pocket before the insurance coverage begins for a covered loss. Master policy deductibles can vary widely, often ranging from $5,000 to $100,000 or more, depending on the association’s specific policy and the type of peril. For instance, a policy might have a higher deductible for windstorm or hurricane damage than for fire.

While the condominium association is typically responsible for paying the master policy deductible, this cost can sometimes be passed on to individual unit owners. If damage originates within a specific unit, or affects only a few units, the association’s governing documents may allow the board to assess the deductible amount to the responsible unit owner(s).

Special assessments represent another financial consideration for unit owners related to the master policy. These assessments occur when the cost of a covered loss exceeds the master policy’s coverage limits, or if a particular peril is not covered by the policy at all. In such situations, the association may levy a special assessment on all unit owners to cover the shortfall. For example, if a major storm causes $5 million in damage but the master policy only covers $4 million, the remaining $1 million would be divided among unit owners through a special assessment.