HOA Insurance: How It Works and What It Covers

Homeowners association (HOA) insurance protects homeowners and condo owners by providing “master” coverage of their associations’ common areas. Those areas include buildings, amenities, and the communities’ grounds — things your association dues go toward maintaining and repairing. In most cases, the policies include liability coverage as well.

But while the HOA’s master policy protects your interest in common areas, it might not cover your home or belongings, so it’s important to understand exactly what HOA insurance is and how it works. That way, you can decide for yourself whether you need to compare home insurance quotes and find additional coverage.

How HOA insurance works

HOA insurance protects all the property — including buildings, grounds, and amenities — that the association is responsible for maintaining and repairing.^[1] These master policies also provide liability coverage that protects the association if someone hurts themselves in a common area, such as a pool or playground.

Your association’s master policy benefits you and other association members. As an owner, you’re responsible for a proportionate share of common-area maintenance and repair costs, which you pay through your association dues.

Without insurance, members would have to cover the full cost of catastrophic damage from fire, natural disasters, or other covered emergencies.

The HOA purchases the policy on behalf of the association, and it pays the premiums from members’ HOA fees. The specific type of coverage it purchases depends on the type of community and the requirements detailed in the community’s governing documents.

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Types of condo association master policies

Condo associations have special HOA insurance considerations because of the overlap between common areas and individual owners’ units. Which of the three types of master condo policies your association has affects how much, if any, of your unit you have coverage for.

Bare walls coverage

“Bare walls” refers to the interior of a condo building, including the wall structures but not the coverings on perimeter walls facing inside your unit. Of the three types of condo master policies, bare walls policies provide the least amount of coverage for individual units. 

If your condo association has bare walls coverage, the policy covers the building’s structure and systems, as well as any personal property that belongs to the association.^[3] It also covers the walls that form the perimeter of your unit, but only as far in as the sheetrock. Paint and other wall coverings, and fixtures like cabinets and moldings, are excluded from coverage.

Walls-in coverage

Walls-in coverage protects the building plus the units’ original structures and fixtures, such as wall coverings, cabinets, and flooring, as well as the wiring and plumbing in your unit. 

While a step up from bare walls coverage, walls-in policies exclude liability and personal property coverage for your unit, and they typically exclude any upgrades or improvements owners have made.

All-in coverage

All-in coverage offers unit owners the most protection. It takes walls-in coverage a step further by covering improvements and customizations you’ve made. For example, if you upgraded kitchen counters and replaced carpeting with hardwood flooring, your association’s all-in policy would include those improvements in its valuation for claims purposes.

What an HOA master policy covers

An HOA master policy is vital to the financial health of the association. And because property owners make up the association, it’s also vital to protecting owners’ investments in their homes.

An HOA master policy covers common areas — which include everything from buildings to clubhouses and other buildings, to swimming pools, playgrounds, and gardens and walking trails. If the association is responsible for maintaining and repairing it, it’s a common area.

For example: Say a covered peril such as fire did $200,000 more in damage than the association had in reserves. The property damage coverage included in the HOA master insurance policy would cover some or all of it. Without the coverage, homeowners would be responsible for paying their share of the costs out of pocket.

The same would hold true if a visitor were to suffer a serious injury in a pool or on a playground and sue the association for damages. Even if the master policy’s general liability insurance didn’t cover 100% of the cost, it would at least reduce the owners’ out-of-pocket expenses. 

What an HOA master policy doesn’t cover

Just like with homeowners insurance, HOA master insurance has certain exclusions, such as damage from:

• Flooding

• Earthquakes

• Water backup

• Deferred maintenance

• Acts of war

Is an HOA master policy enough coverage?

An HOA master policy isn’t meant as a substitute for homeowners insurance, so the coverage doesn’t provide adequate protection for your home and your assets. Even if you have all-in coverage for your condo, for example, the policy doesn’t provide you with liability coverage for injuries that occur in your unit, nor does it protect your personal belongings.

To protect your home and belongings, consider adding condo insurance, also known as HO-6 insurance. An HO-6 policy covers your dwelling and personal property. Plus, it offers personal liability protection and loss of use coverage.

Where the HOA itself is concerned, the association might need to add supplemental coverage to its standard policy. That coverage might include:

• Workers compensation: Workers compensation protects the association against lawsuits arising from association employees’ injuries suffered while at work.

• Discrimination coverage: Discrimination coverage protects the association in the event of a discrimination lawsuit.

• Fidelity coverage: Fidelity coverage protects the association against illegal activities conducted by an association employee, officer, or board member.

• Directors and officers coverage: This coverage protects the association in the event of a lawsuit against association officers and board members for activities connected to their association roles.

Consider loss assessment coverage

One way to reduce the risk of having out-of-pocket expenses arising from an HOA master policy claim is to purchase your own loss assessment insurance.

Loss assessment insurance covers some or all of your out-of-pocket costs arising from an HOA master policy claim. These costs might include your share of the master policy deductible, or the difference between the master policy coverage limits and the actual cost of the damage, that the association charges you as a special assessment.

It’s important to note that standard homeowners insurance, including condo insurance, doesn’t cover loss assessments.

HOA vs. homeowners insurance

The primary difference between HOA insurance coverage and homeowners insurance coverage is that HOA insurance provides property damage and personal liability coverage for association common areas, while homeowners insurance covers property damage and liability coverage for HOA members’ individual homes, including their owned land.

The association buys the HOA policy. Although members pay for it through their association dues, they have no direct involvement in selecting and purchasing the policy. But members can view the policy.

The following table compares the two at a glance.

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HOA vs. condo insurance

HOA insurance protects the association with property damage and liability coverage for the condo building as well as the condominium’s common areas. In some cases, it provides limited physical damage coverage for the condo units as well.

Condo insurance, or HO-6 insurance, is for condo owners. It provides property damage and liability coverage for damage that occurs inside the walls of the owners’ units. 

The following table compares the two at a glance.

HOA insurance FAQs