When you buy a house that has a homeowners association (HOA), you access many benefits. One area of HOA living homeowners need to have a solid grasp on, however, is their insurance obligations. Many residents may often ask how HOA insurance differs from individual homeowners insurance and what is covered under each policy. We break down each of these important aspects to explain what they mean and what your duties are.
What is Homeowners Association Isurance?
Also called a master policy, HOA insurance covers the shared spaces and common areas of a homeowners association, which is an additional payment the HOA makes to ensure their insurance protection. A monthly HOA fee usually goes to maintain this type of insurance.
While the scope of HOA insurance policies will vary based on the needs of the association, most policies cover:
- Common Areas: Shared amenities, including swimming pools, clubhouses, elevators, hallways, lobbies, and parking lots. If any of these spaces is damaged by fire, vandalism, storms, or other covered events, the HOA’s insurance policy will pay for repairs or replacements.
- Exterior Structure Coverage: The insurance could also cover the exterior structure of buildings, including the roof, outer walls, and balconies, depending on the HOA’s master policy. This is particularly prevalent in condominium HOAs.
- Liability Protection: HOA insurance usually protects against accidents in common areas. So, if someone falls on a wet floor in the clubhouse or hurts themselves in a shared space, you’d be covered under the master policy for legal fees and medical costs associated with the incident.
What HOA Insurance Does Not Cover
While HOA insurance provides essential protection for the community, it does not extend to the interior of your individual home or your personal belongings. This is where your personal homeowners insurance comes into play. As a homeowner, you are responsible for securing your own policy to cover the areas that the HOA insurance leaves out.
Understanding Your Homeowners Insurance Obligations
Your homeowners insurance policy is designed to fill the gaps left by the HOA’s master policy. Here’s what a standard homeowners insurance policy typically covers:
- Interior Coverage: Your homeowners policy covers the inside of your home, including walls, flooring, fixtures and appliances. If there’s damage from a fire, burst pipe or other covered event, your insurance will pay for repairs.
- Personal Property: The homeowners association insurance covers only common areas and the outside of buildings; your homeowners insurance protects your personal property, like furniture, electronics, clothing, and jewelry.
- Liability Coverage: If a person gets injured either in your house or on your private property, your homeowners insurance will cover the liability in regards to medical bills or legal claims.
- Loss Assessment Coverage: Sometimes, your HOA will issue a special assessment to cover damages in the event of a claim over the master policy limits. If your homeowners insurance provides loss assessment coverage, it may help cover your portion of the assessment.
Types of HOA Master Policies
To truly understand your homeowners association insurance requirements, it’s important to know what kind of HOA master policy your association has. There are usually two kinds:
1 Bare Walls Coverage: This small business coverage insures only the building structure and common areas. Homeowners own everything in their units—walls, plumbing and electrical fixtures, for example.
2 All-In Coverage: This more comprehensive policy covers not just the building’s structure and common areas but also fixtures, flooring, and appliances inside individual units (up to a certain extent). Homeowners still need personal insurance for their belongings and liability protection.
Why You Need to Review Your HOA’s Master Policy
It is essential to check your HOA’s master policy before buying homeowners insurance. This information will help you identify coverage gaps that need to be filled with a personal policy. For instance, a homeowner may want to buy extra coverage for their home’s interior if the HOA has a bare walls policy.
In addition, your homeowners association insurance might have its own insurance requirements for homeowners. Certain associations require that residents maintain a minimum level of liability coverage or loss assessment coverage. Violating those criteria could lead to fines or other penalties.
The Importance of Communication with Your HOA
If you’re uncertain about what your insurance obligations are, feel free to ask your HOA for some clarification. Ask for a copy of the master policy and go over this with your insurance provider to confirm that you have sufficient coverage. Knowing what your obligations are will not only save you a headache if the worst happens but also save you money.
Final Thoughts
Having home insurance in an HOA community can add protection in case of disasters to your other HOA advantages of hassle-free living, control over your surroundings, and security. By knowing the difference between HOA insurance and homeowners insurance, you will avoid coverage gaps and make sure that both your home and your finances are protected.
Make time to check your homeowners association insurance master policy, talk to a reputed insurance company, and be knowledgeable of your coverage needs. Doing so will help you enjoy the perks of HOA living without any unnecessary risks or surprises.
