What is hoa policy?

If you live in a condominium or planned housing development, you will usually be a part of a homeowners association. As a member of an HOA, you'll typically pay a portion of your condo building or residential community's master insurance policy.

Knowing what your HOA's master policy covers will ensure you don't have too much or too little insurance for your own property.

HOA insurance covers damage and liability for injuries occurring in structures and common areas that the homeowners association owns.

HOA insurance protects you, your association, and its employees' assets if something goes wrong, explains Mario Iveljic at Mag Mile Law, an insurance coverage law firm in Chicago.

"For instance, if an earthquake hits and causes damage to the condo building, the HOA's master policy should have coverage for property damage that will pay for repairs to the building," says Iveljic.

A lawsuit can considerably deplete your HOA's cash reserves. In this case, your HOA would have to request a special assessment, which means higher fees from you to rebuild HOA funds, according to Insurance.com.

An HOA is an organization run by a board of individuals who oversee a residential community. Residents elect the board members from among their neighbors. Community members pay fees to the HOA that cover things such as insurance, property maintenance, and repairs.These are the most common types of HOAs:

If you live in a single-family home, HOA insurance will only cover common areas like parks or pools. You are responsible for obtaining coverage for your house, personal property, liability, and reimbursement for living costs if your home becomes temporarily uninhabitable.

In condos, you generally live in a unit adjacent to others. Since the HOA owns the building's exterior, its master policy will typically cover the repairs to your building's structure and foundation. In addition, the master policy will cover expenses related to accidents or property damage in shared spaces. Typically, you are responsible for losses to the contents in your unit and accidents that occur within your unit.

Here are some of the specific areas of coverage that an HOA master policy can provide, according to Iveljic:

There are generally three types of master policies. Which type you have will determine how much insurance you need for the property you own.

Condo insurance (HO-6) is usually paired with HOA insurance to fill the coverage gaps. The condo association will cover property damage in common areas and injuries that occur in common areas. "It will not cover accidents and injuries that happen in condo units unless it results from a structural problem, according to Nick Schrader, an insurance agent at Texas General Insurance."

While all residents pay a portion of the HOA insurance cost, you are responsible for your own condo insurance policy. Knowing what the HOA's master policy covers is essential to buying the right amount of condo insurance coverage and not overpaying for your insurance.

According to the most recent Condominium/Cooperative Unit Owner's Insurance Report by the National Association of Insurance Commissioners (NAIC), the average annual condo insurance premium in the US in 2019 was $512. Here are the common differences between a "bare-walls" HOA insurance policy and a standard condo insurance policy:

While condo insurance covers condos and co-ops, homeowners insurance (HO-3) covers detached single-family homes. Even if you are a part of an HOA, you will still purchase homeowners insurance if your property is detached from other structures.

With homeowners insurance, you are responsible for all coverage inside and outside your home. Homeowners insurance includes coverage for your dwelling, personal property, liability, and loss-of-use.

HOA insurance is paired with homeowners insurance if your home is part of an HOA. The master policy will usually cover property damage and liability expenses in shared spaces like a pool or a park.

The average annual homeowners insurance premium in the US in 2019 was $1,272, according to the most recent data from the Insurance Information Institute.

You can get a copy of your HOA's master policy from the homeowners association board. The amount of condo insurance you buy will depend on what your master policy already covers. For instance, if your HOA only offers "bare walls," coverage you might need dwelling coverage to pay for damage to your interior structure. However, if your HOA has "all-in" coverage, you may not need any or only minimal dwelling coverage.

HOA members meet quarterly and sometimes monthly, so expect changes in your HOA dues. Reviewing the master policy every year is essential to see if anything has changed and requires you to update your coverage. For instance, if your HOA downgraded or upgraded its policy, that may require you to have more or less dwelling coverage.

HOA insurance is a type of coverage held by HOAs to help protect against liability risks. For example, if a swingset on a shared playground breaks and a child is injured, the association could be sued for negligence. HOA insurance is designed to help protect the HOA against such expenses, but it may also benefit you personally. Understanding how HOA coverage works might help you understand how your association dues are used.

Your HOA likely has a “master insurance policy,” which is coverage that your HOA buys to protect itself against insurance claims. However, the master policy does not only serve your HOA. It also helps protect you from having to cover the cost of liability expenses or repairs to common areas passed along to you in the form of special assessments.

HOA master policies typically cover two things:

HOA fees usually cover maintenance costs to help maintain the common areas of your neighborhood or building. Your HOA dues likely also help pay for the insurance policy. The policy payments are usually divided and each member within the HOA pays an equal fee towards the policy. However, the fees may be lower or higher depending on each member’s access to amenities and other features. If a HOA member does not pay the fees, the HOA could go through the collection process and file a civil suit against the homeowner. This may affect the homeowner’s credit score and future ability to buy a home or be approved for another large purchase.

A homeowners association, or HOA, is an organization led by an elected leadership team that oversees and controls certain aspects of your condo, subdivision or other planned community. There are several components to HOAs that may affect homeowners both positively and negatively. Understanding these aspects might help you decide if an HOA community is the right choice for you.

Many HOAs maintain shared spaces, like parks, playgrounds, pools and other amenities. The HOA is responsible for maintaining the spaces, which could include everything from cleaning to repair costs after a storm.

HOAs also set rules that are designed to improve your community, like parking stipulations or guidelines on landscape maintenance. Your HOA might even have control over which color you can paint your home or condo, what outbuildings you can erect on your property or the number of pets you can have. Some HOAs provide security services, too. All in all, an HOA’s primary goal is to create a cohesive, safe, well-functioning neighborhood where you enjoy living.

To help the HOA in its goal, an HOA fee is usually assessed for each member. HOA fees help keep your neighborhood and shared spaces well-maintained. The fees also go toward the insurance premium for the master policy. The cost of the fee is determined by the HOA’s board of directors and typically involves maintenance and property cleaning fees. The HOA fees may also cover lobby or pool costs if your home or neighborhood has one, employee costs for keeping up these areas and more.

If unexpected expenses arise for your HOA that are not covered by your member dues, your HOA may pass that cost on to you in the form of a special assessment. Keeping your HOA insured may minimize your risk for special assessments, especially high-dollar ones. However, if your HOA finds itself short on funds, such as in the case of an expensive lawsuit, the costs may be charged to each homeowner.

While an HOA insurance policy will cover common areas maintained by your neighborhood’s HOA, it will not cover damage to your individual unit or home and private property. In order to have financial protection for your own home and personal property, you may want to purchase a homeowners insurance policy.

There are many types of homeowners insurance policies. The type of policy you choose will likely depend on your home’s characteristics. A home insurance policy is designed to financially protect you and your home from covered perils, while HOA insurance is designed to financially protect the HOA’s liability and shared spaces.

If you own a home, most insurance professionals recommend you purchase a home insurance policy. A standard home insurance policy offers coverage for your home’s structure, other structures on your property, personal property, guest medical payments, liability coverage and additional living expenses. The covered perils will depend on the type of home insurance policy.

If you live in an HOA, your association likely also has HOA insurance. Your HOA insurance and your home insurance don’t overlap. Your home insurance company covers your home, while the HOA’s insurance company covers shared areas and the liability of the association. However, your policy’s loss assessment coverage, if you have it, may protect you from out-of-pocket costs if a loss exceeds your HOA’s master policy limit.

When you own a home within an HOA, the lines between your homeowners insurance and your HOA’s master policy are pretty clear. You cover your house, and the HOA covers the shared spaces.

However, when you live in a condo, things may be more complicated because you technically only own part of the structure. You will likely be required to have condo insurance, which is also known as HO-6 insurance. Then, your condo association’s HOA policy will work in tandem with your condo insurance policy to provide coverage. However, not all condo associations work the same way, and there are a few different types of coverage that your HOA’s master policy may have:

For condo owners, understanding what type of coverage the association provides on its master policy may be vital. Think of condo insurance and HOA insurance as a puzzle; you likely need to know what the HOA covers in order to build a condo policy that fills the gaps.

HOA members can often add loss assessment coverage through their homeowners insurance policy. This coverage helps cover a portion of damage or loss in common areas so that you might avoid paying your portion of the expense out of pocket. For example, if a lawsuit is costly and exceeds the coverage limits of your HOA’s master policy, those additional costs may be spread among homeowners in the HOA. Loss assessment coverage may protect you financially from these costs.

Whether or not you need loss assessment coverage likely depends on your HOA’s organization structure, HOA features, potential perils in your region and more. Speaking with a licensed insurance agent may help you decide if this coverage is applicable for you.

An HOA is a membership organization that operates for the benefit of a community, where residents pay dues in exchange for certain services. Run by a board of directors elected by residents in the community, the HOA ensures that common areas are maintained and enforces covenants that preserve the appearance of the community.

Single-family home HOAs aim to maintain an aesthetically pleasing look within a neighborhood. This is accomplished by charging homeowners dues to maintain common areas, and by overseeing the operation and maintenance of shared community assets like parks and pools.

HOAs in single-family neighborhoods may also have specific rules for members, such as requirements for homeowners to have a certain type of mailbox, shade of roof shingles or color of paint for the exterior of their home.

Condo HOAs are charged with overseeing the condominium building’s upkeep and maintenance as well as common areas used by condo residents. Condo HOAs may also have their own set of rules regarding the use of public areas shared by owners.

HOAs buy insurance to cover the cost of repairs to the areas and structures they manage, as well as liability protection for injuries that occur in common spaces like swimming pools. HOA board members handle buying HOA insurance and pay policy premiums using funds from dues paid by its members. Since HOA members have equal access to common areas, they pay an equal share of the HOA insurance policy.

HOA insurance—often referred to as a master policy—provides coverage for liability and property damage that the HOA would otherwise have to pay for out of pocket.

For neighborhood HOAs, a typical master policy covers shared assets and neighborhood amenities governed by the HOA. This can include community pools, parks, playgrounds, ponds, gardens, clubhouses and fitness areas.

A typical condo HOA master policy covers everything outside your condo unit, such as the building—including the exterior walls and roof—and shared spaces like stairwells, hallways, elevators and the lobby.

A condo association’s master policy may be one of two types:

This more comprehensive policy covers the exterior of the building and some interior elements like appliances, carpets, plumbing and wiring. It doesn’t cover your personal belongings, like furniture and clothes.

This type of policy insures only the bare structure of the condo building. It does not cover anything within a unit’s walls or your personal belongings. Some bare walls policies do cover plumbing and electrical systems.

HOA insurance also covers injuries that happen in common areas. For example, if a parent sues the homeowners association for damages after their child breaks a leg on the community playground, the master policy would cover the HOA’s legal defense and any settlement, up to policy limits.

HOA insurance provides coverage for physical damage to HOA-managed structures and common areas and liability expenses related to these areas.

Physical damage coverage pays to repair or replace damage in common areas like parks and playgrounds.

For condo HOAs, physical damage coverage also protects against damage to the exterior of the condo building (like lost roof shingles) and internal shared building areas like stairwells and basements.

HOA insurance typically covers damage caused by natural disasters, fire, storms and acts of vandalism.

General liability covers the legal defense of the HOA and any settlements or judgments if someone sues after being injured in a common area. For example, a guest slipping and falling on an icy sidewalk at the neighborhood park could lead to an expensive lawsuit.

Having adequate HOA insurance ensures the HOA doesn’t need to impose heavy assessments for members to cover the cost.

HOA insurance will not cover property damage or liability for injuries that happen on your own property or inside your house or condo. It also typically excludes coverage for any damage caused by floods or earthquakes.

HOA insurance will not cover:

HOA insurance won’t also cover your personal property if it gets stolen in a common area. You’ll need to turn to your own homeowners insurance or condo insurance for this coverage.

Likewise, if your car is stolen from the community pool parking lot, you’ll need to look to your comprehensive car insurance for coverage.

Most HOAs are required by their bylaws to carry at least some insurance, and many states mandate HOA insurance. For example, Arizona requires:

HOA insurance financially protects shared amenities and community property against natural disasters, acts of vandalism and liability claims. Without it, members of an HOA could be held personally liable for damages relating to the use of common areas. Some states provide limited liability for HOA members but make it contingent on the HOA having enough insurance.

HOA board members should make sure the master policy has adequate coverage. If there is a flood exclusion in the master policy, consider buying a master flood insurance policy. If earthquakes are a concern in your area, look into buying earthquake insurance.

It’s smart to look over an HOA insurance policy each year to see if any changes, or increases in coverage, need to be made.

While HOA insurance pays for property damage and liability expenses shared by a community, your own homeowners insurance or condo insurance pays for damage to your residence and belongings. Your policy also covers your legal defense and settlements if you’re sued for an accident for which you’re responsible (even if that accident happens in a common area).

For example, an HOA insurance policy would cover the HOA’s legal defense if someone sues after getting hurt at the community pool, but your own homeowners insurance policy would apply if someone sues you because your dog bit them at the community park.

A traditional homeowners insurance policy also pays for repairs and replacement of damage to your house and replacement of your personal possessions after a covered loss. If a tornado ravages your neighborhood and destroys your house and all your belongings, the house structure and your personal possessions would be covered by your homeowners insurance policy. HOA insurance would cover physical damage done to shared structures in the neighborhood, such as a clubhouse or community fitness center.

For condo owners, an HOA insurance master policy covers the exterior of your building and shared common areas. You need your own condo insurance policy to provide protection for the interior of your unit. Like homeowners insurance, condo insurance covers your personal property (such as furniture, clothing, TVs and dishes) and provides liability protection. It also provides coverage for interior walls if they are damaged, such as in a fire.

Typically found in the “loss of use” section in a home insurance policy, your additional living expenses coverage pays for you to live elsewhere while your house or condo is repaired because of a covered loss, like a fire.

This optional coverage helps cover costs in situations where the condo HOA insurance won’t. For example, say a fire damages the elevator in your condo building, causing $350,000 worth of damage. If the HOA master policy has $300,000 in coverage for the building’s structure, that leaves $50,000 not covered. The condo HOA could divide this remaining cost among the building’s condo owners. Loss assessment coverage can pay for this additional cost so you don’t have to.

This coverage pays for smaller injuries that happen at your house or condo, no matter who is at fault. The limit for medical payments coverage is usually $1,000 to $5,000.

Related: What does homeowners insurance cover?

Homeowners association (HOA) insurance is a type of policy that's designed for communities that have shared areas used by all of the residents. They're most common in condos, but a single-family home association may also purchase coverage.

This specialized coverage applies to common property, such as roofs and stairways, clubhouses, playgrounds, swimming pools, green space and sidewalks. If there’s damage to association property, or if someone is injured and sues, the HOA insurance policy covers it.

This protects not just the HOA’s finances, but also the personal finances of everyone who lives there. That’s because without the right insurance, residents would have to help pay for any shortfalls.

If you live in a community that has an HOA and carries insurance, you should familiarize yourself with the HOA insurance policy. It's a good idea for all homeowners to know what's covered by the HOA policy and what falls under your personal homeowners insurance.

Read on for everything you need to know about a HOA insurance policy.

It works the same way other insurance policies do: protecting against property and liability claims. If community property gets damaged or if someone sues the HOA, the insurance company will review the claim and determine what is covered.

Incidentally, not all lawsuits against HOAs are for physical injuries. Residents sometimes sue over things such as how board elections are publicized or how regularly the common areas are maintained.

For the same reason you get any kind of insurance: to provide protection in case something goes wrong. Without HOA insurance, your association’s finances – and your own – could be at risk.

For example, suppose a visitor is badly injured by a fall on an icy sidewalk. The resulting lawsuit could use up a big chunk of the HOA’s cash reserves, leaving it underfunded for current and future needs. The HOA would then have to request a “special assessment” – extra cash in addition to the dues each resident already pays – to build up those reserves once more.

Or suppose fire destroys half a dozen condo units and your HOA insurance doesn’t cover the cost of tearing down and hauling away the damaged buildings. That extremely costly work would have to be paid for by the HOA – and again, every household might wind up being asked for extra money in order to build the reserves back up.

The “master policy” covers damage or loss to the common areas as well as some liability coverage. Usually, with a condo policy, it’s “bare-walls in” coverage, which covers damage to the structure of buildings – framing, drywall, wiring, plumbing, insulation – but not the interiors of the condo or home.

Residents must buy their own condo insurance or homeowners insurance, depending on the type of home, to protect their own personal property, personal liability, and any structures for which they are responsible.

The HOA master policy doesn’t cover everything, though. Damage from things like earthquakes, hurricanes and floods might be specifically excluded. However, the HOA board could buy extra coverage for these situations.

As noted, the master policy will include general liability coverage. Some states have laws that set the minimum coverage, although an HOA can opt to purchase more. The board could also choose to include an umbrella policy (for claims in excess of the liability coverage), “crime/fidelity” coverage to guard the HOA’s reserves and operating account, workers compensation, and directors and officers (D&O) insurance to protect board members against any lawsuits.

While the HOA master policy covers a lot, it's limited in terms of coverage for you and your home. That's especially true if you live in a single-family home, where you are responsible for the entire structure.

A homeowners policy covers the house itself, everything in it and provides liability protection for you. The HOA policy would cover everything that is shared space, like a clubhouse or pool.

A condo insurance policy is a little different. In most cases, the HOA or condo owners association master policy will cover the structure of your condo, and you're only responsible for insuring what's on the inside. However, condo policies vary, so it's important to know how much condo insurance you need.

Major insurance companies often sell just about any kind of coverage, including HOA insurance. But because it’s a very complicated type of insurance, not all brokers can provide expert advice.

For example, let's say an HOA board bought a $1 million D&O policy. Yet when they got sued, they discovered that the $1 million limit included the cost of legal services – which wound up costing about $1 million. As a result, each board member had to pay about $100,000 toward the damages.

To make sure the community – and themselves – have adequate protection, HOA board members should work with an agent who truly understands the ins and outs of this complex form of insurance. The best way do that is to request quotes from companies that specialize in commercial real estate insurance. Here are a few:

You and your neighbors. As HOA members, residents pay dues (also known as an assessment) to live in the community. Some of that money is used for day-to-day operations, some goes into cash reserves for long-term repairs and improvements, and some pays for HOA insurance.

Since you’re paying for this insurance, you have the right to ask whether the HOA board has purchased:

There’s no such thing as a “typical” cost for HOA insurance, since every community is different.

Some HOAs have very limited common space, and some have greenbelts, running/biking trails, lakes, sports fields, swimming pools, clubhouses and fitness centers. Location matters, too: Policies in areas known for severe weather or wildfire danger cost a lot more than policies in more temperate areas.

HOA insurance is a type of commercial property insurance that is paid through the dues you pay your homeowners association (HOA). It covers physical damage to structures and common spaces managed by your HOA as well as certain liability expenses.