What Is CIC Insurance and What Does It Cover?

Common Interest Community (CIC) insurance provides protection for shared living environments. These policies are designed for condominiums, townhomes, and homeowner associations, addressing the unique risks associated with communal property ownership.

Understanding Common Interest Community (CIC) Insurance

Common Interest Community (CIC) insurance refers to policies designed for properties where individual units are privately owned, but certain areas and amenities are jointly owned and managed by an association. These communities include condominium associations, homeowners associations (HOAs), and cooperatives. A defining characteristic of a CIC is the obligation for owners to contribute financially to the maintenance, improvement, and insurance of shared common areas, administered by an association.

The primary purpose of CIC insurance is to safeguard the collective property, common areas, and the association itself from various financial and legal risks. The policy primarily protects the association, its board members, and the collective property, rather than individual unit owners. This distinguishes it from standard individual homeowner’s insurance, which focuses on a single-family home and its contents.

Essential Coverages in a CIC Policy

A CIC master policy includes several types of coverage, each addressing specific risks faced by the community association. These coverages protect the shared assets and the association’s operations.

Property Coverage

Property coverage insures the physical structures of the condominium or community, including common elements and shared amenities. This typically covers building exteriors, roofs, foundations, hallways, lobbies, and recreational facilities like pools or gyms.

General Liability Coverage

General liability coverage protects the association against claims of bodily injury or property damage that occur in common areas. For example, if someone slips and falls in a shared lobby or pool area, this coverage can help with medical expenses and legal costs. Some associations obtain umbrella liability policies to provide additional coverage beyond the limits of their general liability policy.

Directors & Officers (D&O) Liability Coverage

Directors & Officers (D&O) liability coverage provides protection for the volunteer board members and officers of the association. This insurance shields them from personal liability arising from claims related to their duties, such as alleged mismanagement, breach of fiduciary duty, or wrongful acts. D&O insurance typically covers legal defense costs, settlements, and financial losses incurred by board members or the association due to such claims.

Fidelity Bond or Crime Coverage

Fidelity bond or crime coverage protects the association against financial losses due to theft or embezzlement of association funds. This coverage is important for safeguarding the collective financial assets managed by the board and any managing agents or employees. The amount of coverage often correlates with the association’s operating and reserve balances, sometimes requiring coverage equal to a certain number of months of assessments plus reserves.

Workers’ Compensation Insurance

Workers’ compensation insurance is required if the association directly employs staff, such as maintenance personnel or managers. Even if an association does not have direct employees, it may still benefit from or be required to carry this coverage, particularly if it engages contractors or vendors, as some states may transfer liability for injuries to the association. This insurance provides wage replacement and medical benefits for employees injured on the job, limiting the association’s liability.

Master Policy Versus Individual Unit Owner Coverage

Understanding the distinction between the association’s master policy and an individual unit owner’s insurance is essential for complete protection.

The master policy primarily covers the building’s structure and common areas, but its coverage typically stops at the interior surfaces of individual units. This means items within a unit, such as personal belongings, flooring, cabinetry, and appliances, are generally not covered by the association’s policy.

For this reason, individual unit owners typically need to purchase their own insurance policy, often referred to as an HO-6 policy for condominiums. This individual policy covers the interior of the unit, including fixtures like carpets, walls, and appliances, as well as personal belongings such as furniture and electronics. An HO-6 policy also provides personal liability coverage if someone is injured inside the unit.

The scope of the master policy regarding the interior of units can vary, sometimes referred to as “bare walls-in,” “walls-in,” or “all-in” coverage. “Bare walls-in” offers the least coverage, typically just the structural framework and drywall, leaving the unit owner responsible for almost everything else inside. “Walls-in” coverage might extend to basic fixtures, plumbing, and electrical within the unit, but often not upgrades. “All-in” coverage is the most comprehensive, including fixtures, built-in appliances, and structural improvements.

Regardless of the master policy’s type, unit owners are responsible for insuring their personal property and any improvements or renovations made to their units beyond the original construction. Unit owners should review the association’s governing documents and master policy details to identify any gaps in coverage and ensure their individual HO-6 policy adequately protects their assets and liabilities. Additionally, individual policies may include loss assessment coverage, which can help cover a unit owner’s share of a master policy deductible in the event of a large claim affecting common areas.