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March 21, 2022

Millennials are the largest living adult generation on earth. Their preference in housing is condominiums. Unlike their baby-boomer predecessors, millennials prefer short commutes, access to amenities, and walkability.

Gone are dreams of a large suburban home. Putting responsibilities into someone else’s hands is appealing to this generation. This includes snow removal, lawn maintenance, window cleaning, condo association insurance, etc.

Millennials are a busy generation and want to be part of everything. That is what makes condo living the preferred choice. Any amenities of the condo complex such as a gym, tennis court, or pool are icing on the cake.

Tenants may have the misconception that condo association insurance protects them from loss. As a condo owner, you need to understand your legal obligations regarding insurance.

Let's take a look at what condo insurance does and does not cover.

Condo Association Master Insurance Policy

A condo association master insurance policy covers the property at large. This includes the structure, common areas of the buildings and land, plus workers’ compensation. Most homeowners’ associations have a legal obligation to purchase this coverage.

There are additional areas of coverage to consider. Those may fall under your master policy. If the master policy does not cover the additional areas, a rider may be wise to make sure you don’t suffer undue loss.

Coverage varies from carrier to carrier. Make sure you have the coverage necessary by reading the policy carefully. Ask your agent to clarify areas you don’t understand.

Structure Coverage

There are three different types of insurance coverage available to condominium associations.  They are bare walls coverage, single entity coverage, and all-in coverage.

Bare Walls

This is the least amount of structure coverage available. If the condo association purchases bare walls coverage, the structure of the condo unit up to the drywall has coverage. This includes the exterior, roofing, framing, insulation, piping, wiring, and drywall.

Single Entity Coverage

This mid-range policy provides coverage for all items under a bare walls policy, plus specific built-in property. Built-in items covered by the insurance include things such as light fixtures and finishes in individual units. This does not cover the tenant's private property.

All-In Policy

This is the most comprehensive condo master insurance policy available. The all-in policy provides coverage for all real property in the residential condominium structure. This includes fixtures such as appliances in individual units, plus any improvements or upgrades the owner made to their unit.

Common Areas

Master policy insurance for condo associations covers damage that happens in shared spaces. This includes indoor exercise facilities, hallways, lobbies, event spaces, elevators, and garages.

It also provides coverage for outside areas such as pools, outdoor gathering spots, parking lots, walkways, and the general landscape.

Workers’ Compensation

The master policy should have a provision that covers workers’ compensation. This protects staff employed by the condominium complex. The policy covers office staff, marketing staff, groundskeepers, contractors, and maintenance workers.

Workers' Compensation coverage may only apply to people on the company payroll. A special provision may be necessary to cover HOA board members.

Extra Condo Association Insurance

You may want to consider adding one or more of the following types of coverage to your master insurance. The more tenants your complex has, the greater the chance of encountering problems.

General Liability

One of the most important types of insurance coverage is general liability. This provides coverage for lawsuits due to accidents within a building. Slip and fall is a common liability injury.

Other incidents under this coverage include lawsuits for negligence. This can be something like placing owners at risk due to inadequate security.

Director’s and Officer’s Liability

Those who serve as board members and directors may be personally liable under certain circumstances. For instance, the board installs a new walkway and fails to put in a mandatory hand railing. If someone suffers an injury because of that omission, every board member may be found liable in a lawsuit.

The director’s and officer’s liability coverage provides protection for these types of situations.

Fidelity Liability

Fidelity liability insurance protects against theft by staff. If an employee or board member embezzles, steals money, or forges documents the insurance covers the loss.

There is no protection against theft by people who are not employees. If you are adding this rider, make sure it contains an exception that covers board members.

You need to be careful of the people you give financial responsibility to. The insurance will exclude coverage if you give financial responsibility to a "high risk" person. A high-risk person is someone who has a history of dishonest behavior.

When filing a claim for this type of loss, it must be an actual theft. Funds that are lost without the intent of theft are not covered by this insurance. Lost funds are usually the result of negligence, not illegal intent.

Personal Property Coverage

If your master insurance policy does not cover personal property, you will want to buy extra coverage. Business personal property is any moveable item your business owns. This includes office supplies, furniture, machinery, appliances, and more.

With a condominium complex, personal property may be extensive. Think about everything you provide with amenities.

Consider the cost of exercise equipment in your gym. Add in the pool accessories, such as nets, lifeguard rings, etc. Don't forget decorative items like artwork, rugs, vases, and statues.

Flooding, Earthquakes, and Sinkholes

Even if you have an “open peril” insurance policy, it usually contains exclusions. There may be no coverage for damage from flooding, sinkholes, and earthquakes. You may want to speak with your insurance agent about adding extra coverage.

More than 143 million Americans living in the 48 contiguous states are exposed to earthquakes. That number does not include Alaska, Hawaii, and the U.S. territories.

The states most prone to damage and injuries from earthquakes are:

  • Arkansas
  • California
  • Illinois
  • Missouri
  • Nevada
  • Oregon
  • South Carolina
  • Tennessee
  • Utah
  • Washington

California and South Carolina are also part of the top ten for flooding. Other states on the list are Georgia, Louisiana, Massachusetts, New Jersey, New York, North Carolina, and Virginia. Florida makes both this and the sinkhole list.

Most sinkholes happen in Alabama, Florida, Kentucky, Missouri, Pennsylvania, Tennesee, and Texas.

If your condominium complex is in any of these states, check with your insurance provider. You may be able to buy coverage for loss from these natural disasters.

Is a Master Insurance Policy Mandatory?

Purchasing insurance protects the homeowners association (HOA) from unexpected loss. The HOA establishes the rules about what coverage the condominium complex needs.

Whether or not you have a legal obligation to purchase a master insurance policy will depend on state law. Your insurance provider should be able to confirm what coverage is mandatory in your area.

How Master Insurance Policies Are Paid

The tenants of the condominium complex pay for the master insurance policy as a portion of their monthly association fees. There is no exception made for board members, as they are also homeowners and must pay their portion of the fees.

Condominium complex owners have access to all condominium amenities and public areas. They must pay an equal portion of the insurance costs.

What Condo Association Insurance Does Not Cover

The residents of the condominium complex are responsible for purchasing insurance coverage for areas the master policy does not protect.

Some tenants become confused because after they close the sale on their unit they receive a “certificate of insurance.” This advises the tenant that the homeowners’ association has coverage under the master policy.

The tenant may want to show that statement to their insurance agent. Their agent can tell them what additional coverage they need to buy on their own.


The amount of coverage tenants need depends on the declarations in your master policy. The owner of the condominium unit may need to buy coverage for items inside the unit.

Large appliances, wall and floor coverings, and window treatments may have master policy coverage. If not the tenant will need to insure those items. The tenant will need to buy insurance for furniture, electronics, clothing, small appliances, jewelry, etc.

If there is damage to a unit that prevents a tenant from living there, your master insurance policy may not contain comprehensive coverage for their additional living expenses. The tenant may need to purchase coverage for this on their own.

Personal Liability

The owner of the condo unit is responsible for insurance coverage protecting them from legal claims and expenses because of bodily injury or property damage on their property. This includes slip and fall injuries that happen in their unit. Their insurance covers the injured person’s medical expenses.

Check Your Coverage

If you are asking yourself, “What is condo association insurance?” make sure you read your policy declarations completely. It is important to understand your policy and confirm you have sufficient coverage.

Hummel Group understands that condo association insurance policies need to be customized to fit association needs. No matter how small or large your condominium association is, we can create the correct insurance package for you.

We invite you to get a quote using our convenient online form or call 800-860-1060. We look forward to helping you get the protection you need.

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