What Is a Master Insurance Policy and What Does It Cover?

A master insurance policy provides a foundational layer of protection for shared residential properties like condominiums, co-operatives, and homeowners associations (HOAs). This singular policy safeguards the common elements and the overall building structure, distinguishing itself from the individual insurance policies unit owners maintain for their private spaces. The primary purpose of such a policy is to cover damages and liability risks associated with the parts of the property collectively owned and used by all residents. It forms a financial safeguard for the community’s shared assets.

Understanding Master Insurance Policies

A master insurance policy, also known as a condominium association insurance or HOA master policy, is a single insurance contract purchased and held by the governing body of a multi-unit property, such as a condominium association, HOA, or co-operative board. This policy is funded by a portion of the dues or assessments paid by individual unit owners. It provides collective coverage for the entire property, including its physical infrastructure and common areas.

These policies are prevalent in multi-unit residential settings, including condominium complexes, townhome communities, and housing developments governed by homeowners associations. The master policy protects the collective interests of all unit owners by insuring shared assets against specific risks and damages. The association’s bylaws dictate the required levels of coverage.

What Master Policies Cover

Master policies detail the scope of coverage for the building’s structural components and common areas. This includes the building’s exterior, such as roofs and exterior walls, and shared interior spaces like hallways, lobbies, elevators, and stairways. Shared amenities, such as swimming pools, gyms, clubhouses, and playgrounds, are also covered. Beyond property damage, these policies include liability coverage for accidents or injuries that occur in these common areas. For instance, if a visitor slips and falls in a common lobby, the master policy’s liability portion would cover legal and medical expenses.

The extent of coverage for interior unit components varies depending on the specific type of master policy.

Bare Walls-In Policy

A “bare walls-in” or “studs-out” policy offers the most limited coverage. It protects only the building’s exterior, common areas, and structural elements up to the drywall. This policy does not cover anything inside the individual unit, such as fixtures, appliances, flooring, or paint.

Single Entity Policy

A “single entity” or “original construction” policy is more inclusive. It covers the building’s structure, common areas, and basic fixtures and finishes originally installed within individual units, like standard flooring, cabinets, and appliances. However, it excludes improvements or upgrades made by unit owners.

All-In Policy

The most comprehensive type is an “all-in” or “all-inclusive” policy. This policy covers the entire structure, common areas, and all fixtures, installations, and improvements within individual units, including upgrades made by owners.

What Master Policies Do Not Cover

Despite their broad scope, master insurance policies have specific limitations and exclusions, necessitating individual unit owner insurance. These policies do not cover the personal belongings of individual unit owners, such as furniture, electronics, and clothing. They also exclude coverage for interior finishes and upgrades within individual units, including paint or custom flooring, especially under “bare walls-in” policies. Liability for incidents that occur solely within an individual unit is not covered by the master policy.

The master policy’s deductible can impact unit owners in the event of a claim. If a loss originates from an individual unit or affects multiple units, unit owners may be responsible for a portion of the master policy deductible. These deductibles range from a few thousand dollars to tens of thousands, and sometimes higher in coastal areas. While the master policy covers the overall building, it does not cover wear and tear, deterioration, mold, or damage from insects or animals. Damage from repeated leaking or seeping from appliances or plumbing is also excluded, as these are classified as maintenance issues.

How Master Policies Interact with Unit Owner Coverage

The master insurance policy and an individual unit owner’s insurance policy, known as an HO-6 policy for condominiums, work together to provide comprehensive coverage. An HO-6 policy fills the gaps left by the master policy. This individual policy covers the interior structure of the unit, from the “walls inward,” including components like walls, flooring, and ceilings. It also provides coverage for the unit owner’s personal property, such as furniture, electronics, and clothing, against perils like fire, theft, and vandalism.

An HO-6 policy extends to personal liability protection for incidents occurring within the unit, covering legal expenses and medical payments if someone is accidentally injured on the property. It includes “loss of use” coverage, which pays for additional living expenses like hotel stays or meals if the unit becomes uninhabitable due to a covered loss. Loss assessment coverage is an important component of the HO-6 policy. This coverage protects unit owners from unexpected costs if the condominium association levies a special assessment to cover damages or liability that exceed the master policy’s limits, or to pay a large master policy deductible. While standard HO-6 policies might offer a minimal amount, often around $1,000, for loss assessments, unit owners can purchase endorsements to increase this limit, which is advisable given the potentially high master policy deductibles.