HOA and Condo Insurance: What You Need
Insurance is one of the largest line items in most association budgets and one of the least understood. This guide explains the core policies an HOA or condo association usually carries, what each one does, and where owner policies pick up. Insurance requirements and coverage definitions vary a great deal by state and province, so this is general information, not insurance advice. Always confirm specifics with a licensed agent who knows community associations.
Why associations carry their own insurance
An association owns or is responsible for shared property and faces risks that individual owners cannot cover on their own. If a common-area roof fails, a visitor is injured on the grounds, or a board is sued over a decision, the association needs coverage in its own name. Governing documents and local law often require specific policies, and lenders may require them too.
The goal is a coverage stack where each policy handles a different kind of risk, with no large gaps and reasonable limits. Reviewing that stack every year with a qualified agent is a core board responsibility.
The master property policy
The master property policy, sometimes called the master hazard policy, covers physical damage to the buildings and common property the association is responsible for. In a condo, this often includes the structure itself. In a detached-home HOA, it usually covers common amenities and structures rather than individual homes.
Common coverage forms
- Bare walls: covers the structure and common elements but not fixtures or improvements inside units.
- Single entity: covers the structure plus original unit fixtures as built.
- All-in or all-inclusive: covers the structure plus unit fixtures and some improvements.
Which form applies determines where the association's coverage ends and the owner's begins. The terms and their exact meaning vary by insurer and jurisdiction, so read the policy and your governing documents together rather than assuming.
General liability coverage
General liability protects the association if someone is injured on common property or their property is damaged and the association is found responsible. Think of a slip on an icy walkway, an injury at the pool, or damage caused by a failed common system.
This policy typically pays for legal defense and covered damages up to its limits. Because a single serious claim can exceed a standard limit, many associations layer an umbrella policy on top, which we cover below.
Directors and officers (D&O) coverage
Directors and officers liability, or D&O, protects board members and the association from claims arising out of governance decisions. Owners sometimes sue over enforcement actions, elections, spending, or alleged breaches of duty. D&O helps cover legal defense and damages for these management and governance claims, which general liability usually does not.
Volunteers are far more willing to serve when they know decisions made in good faith are covered. Coverage terms differ widely, including whether they cover non-monetary claims and defense costs, so review the policy carefully with your agent.
Other policies to consider
Beyond the core three, several other policies are common or sometimes required. Which ones you need depends on your community and your governing documents.
- Fidelity or crime coverage: protects against theft or fraud by people who handle association funds, including managers and board members.
- Umbrella or excess liability: adds a layer of limits above general liability and sometimes D&O for large claims.
- Workers compensation: may be required if the association has employees, and sometimes useful even for uninsured contractors.
- Flood or earthquake: often excluded from standard property policies and bought separately where the risk is present.
- Equipment breakdown: covers mechanical failure of shared systems like boilers and elevators.
Requirements and availability vary by location, and some coverages are mandated by statute. A community association insurance specialist can help you match the stack to your actual risks.
Where owner policies fit in
The association's policies do not cover everything. Individual owners generally need their own policy for their belongings, interior improvements, personal liability, and often for the gap between the master policy and what they own. In condos this owner policy is frequently called an HO-6 in the US.
Boards should communicate clearly to owners what the master policy does and does not cover, and encourage or require owners to carry adequate personal coverage. Miscommunication here is a common source of disputes after a loss. Because the split varies by policy form and jurisdiction, direct owners to a licensed agent for their own coverage decisions.
Frequently asked questions
What does the master policy cover?
It covers physical damage to the buildings and common property the association is responsible for, up to its limits. The exact reach depends on whether it is a bare-walls, single-entity, or all-in form, which determines where association coverage ends and owner coverage begins. Read the policy alongside your governing documents.
Do board members need D&O insurance?
Most associations carry directors and officers coverage to protect board members and the association from claims over governance decisions. It helps cover legal defense and damages that general liability usually excludes, and it makes recruiting volunteers easier. Coverage terms vary, so review the policy details with your agent.
Is flood or earthquake included?
Usually not. Standard property policies commonly exclude flood and earthquake, and associations in exposed areas typically buy those separately. Whether you need them depends on your location and, in some cases, on statutory or lender requirements.
What insurance do individual owners still need?
Owners generally need their own policy for belongings, interior improvements, personal liability, and the gap between the master policy and what they own. In US condos this is often an HO-6 policy. The right amount depends on the master policy form, so owners should consult a licensed agent.
How often should the board review coverage?
At least once a year, ideally before renewal, and any time the community changes materially. Review limits, coverage forms, and exclusions with a specialist, and confirm the policies still match your governing documents and current risks.
Related
This guide is general information, not legal, financial, or tax advice. Rules vary by state and province; confirm specifics for your community with a qualified professional.