When you buy a home or a condo, you may need to join the homeowners association (HOA) and pay HOA dues. One of the perks that usually come with being part of the homeowners association is HOA insurance coverage. This insurance does quite a bit to protect you and other owners in the area, but it’s not the end-all solution for protection.
So, what is HOA insurance? It’s important to understand what HOA insurance is and how homeowners association insurance works in conjunction with your personal insurance policy. The better you understand this relationship, the better you can protect yourself from unexpected gaps in coverage.
What is an HOA?
HOA is an acronym that stands for the homeowners association. What is the HOA? It’s a collective group that creates a set of guidelines, bylines, and regulations that people in the community need to live by. The chief goal of the HOA is to protect the interests of the owners and the value of the property that is shared.
Your HOA generally takes out an HOA master insurance policy to help protect the common areas and shared features of your community. All members living in the designated area are generally required to pay monthly or annual dues to the HOA to help pay for the services and the HOA insurance policy.
How Does HOA Insurance Work
HOA insurance works to protect the owners in a neighborhood or condo building from property damage or liability in the common areas. For example, if your neighborhood has a park and someone gets hurt there, the HOA home insurance could cover the liability costs.
In living situations where a building is shared, like with a condo, the HOA insurance also generally covers the exterior of the building and may cover shared walls. For homes, the exterior of your house wouldn’t be covered under the HOA policy. Only the common areas shared by the community are covered.
What is Covered by an HOA Master Policy
Known as the HOA master policy, this coverage from HOA insurance companies generally applies to all shared or common areas. The policy is taken out and maintained by the HOA, but it’s certainly something you should review before moving into a neighborhood or a condo.
General areas of coverage include:
- Property damage: The policy provides protection if there is property damage to a common area. One of the most common uses of this is damage from natural elements like wind and fire.
- Liability: This component of an HOA master policy covers the owners in case someone gets hurt in a common area. One of the most common uses of this would be something like a slip and fall at the pool.
- Building ordinance coverage: Some HOA plans can provide coverage when updated regulations require the rebuilding or repair of an existing building.
Keep in mind that the HOA master policy might not always be large enough to cover the costs of some claims. When this happens, the added expense generally is spread among the residents. If you’re worried about this happening, you can look into getting HOA special assessment insurance that can help cover or offset these unexpected expenses.
HOA Insurance vs. Condo Insurance
Often, there can be overlap and gaps that arise between different coverages, specifically between your HOA master policy and your individual condo insurance. While your HOA insurance covers the common areas, your condo insurance covers the things inside of your residence.
For example, bare-walls coverage policies may cover all of the structural walls inside of your condo. Your individual condo plan may cover this as well. It’s important to understand what’s covered in your master policy and what isn’t — that way, you avoid having too much or too little coverage. Start by reviewing your HOA’s policy and ask specific questions like, “Does HOA cover fire insurance?” or “Does HOA cover water damage insurance?”
Types of Condo HOA Insurance
There are two main types of HOA insurance your condo may have — bare-walls coverage and all-in coverage. Understanding the difference between the two is imperative before you shop for your personal plan to make sure you don’t leave significant gaps where you think you’re covered.
- Bare-walls coverage: This type of condo insurance covers all of the bare walls in your condo and the things inside the walls (electrical, plumbing, HVAC, etc.). The idea here is that it’s tough to know who would cover damage to a wall or something inside a wall as it’s often shared by more than one individual owner.
- All-in coverage: This level of condo insurance goes a step past bare-walls coverage and includes all of the major appliances and installations inside your condo. This would include things like stoves, appliances, and countertops. With this plan it’s especially important to look at what is specifically covered.
HOA Insurance vs. Regular Homeowners Insurance
The separation between what is covered by an HOA master policy and a regular homeowners insurance policy is much clearer than the separation between the HOA policy and a condo insurance policy. The reason for this is that your home doesn’t share walls or other things like electrical wiring with your neighbor. Still, there may be areas of your property that could be covered under your master policy you need to be aware of.
HOA Insurance FAQs
The cost of HOA insurance varies dramatically based on the value of your property, the number of common areas, the risk associated with these common areas, and where you’re located in the country.
Some neighborhoods and other areas may require you to pay HOA dues to live there. Most HOAs that carry an insurance policy are mandatory to join.
Yes, most HOA insurance policies cover damage to common area structures. Additionally, some condo HOA policies may cover shared walls and the exterior of your personal residence.
Yes, HOA master insurance generally covers liability in common areas like the community pool or gym.
Condo insurance is a policy you take out to protect a condominium, while homeowners insurance is a policy you take out to protect your free-standing home. The differences between the two target the specific needs that come with each type of dwelling.