Did you know that the number of American households who live in condominiums (also known as condos) or co-operatives (also known as co-ops) is greater than 5 million? Additionally, half of the existing 5 million co-op or condo units were built within the last 30 years.
If you're one of the many Americans who live in a condo or co-op, you may be wondering about HOA insurance. However, if you don't know how it works, you might feel confused or frustrated.
Fortunately, in this article, we'll review everything you need to know about HOA insurance.
You will learn what insurance you need to keep your co-op or condo covered while living in your home. Read on to learn more.
What Is HOA Insurance?
HOA insurance is a type of insurance. It covers property damages and also expenses related to injuries that occur on shared property. It might also cover other types of claims. People also call it a master policy. The homeowners association of the shared property purchases this insurance.
Insurance premiums for this coverage are paid using funds from the HOA fees that the co-property owners pay.
The coverages offered on the HOA insurance policy depend on two things:
- The specific insurance policy the homeowners association bought.
- Most importantly, on what type of home you live in. For example, a condominium, townhouse, or a single-family home each has different risks and would require different coverage options.
HOA insurance is different than home insurance. However, these two policy types have some features in common.
Do you live in an HOA? In this case, understanding the workings of HOA insurance and whether it has overlap with your insurance could help in saving you money.
What Is an HOA?
An HOA is a homeowners association. This is a board made up of residents who aren't paid for what they do and who work together so they can address any issues that occur within their neighborhood, maintain public spaces, and enforce the community's established rules.
Each HOA will have rules and bylaws set that it enforces. Usually, an election process occurs that determines who is on the HOA. If you want to get involved, you can get elected and volunteer.
The responsibilities of an HOA vary. If you have common areas, like a pool, for example, they'll be responsible for maintaining and cleaning them. Sometimes, they'll also manage neighborhood security.
HOAs may also require members to ask them for permission before they make a change to their condo or home. Examples of these changes include painting or a major renovation.
One of the main responsibilities many HOAs have is to provide liability protection. Liability protection is necessary in the case of accidents that occur in a common area.
This is where HOA insurance comes in. It would help in covering repair, medical, and legal costs in the case of an accident.
Residents of the HOA are charged fees to pay for all the work and upkeep the HOA does, as well as the cost of HOA insurance. Residents usually pay these fees on a yearly or monthly basis.
Why HOA Fees That Pay Toward HOA Insurance Are Worth It
You may feel a bit annoyed that your HOA fees will go toward the payment of the HOA master policy that covers the co-op or condo community property where you live. It might be even more annoying if this insurance for homeowners associations is a reason why your HOA fees seem a little high.
However, it's worth it to pay these fees. This is because HOA insurance, in the long term, protects you.
For example, say that a storm hits your HOA, and this results in the clubhouse being damaged. After this occurs, the master policy of the HOA typically will cover some—or even all—of the costs required to repair the clubhouse.
If the insurance wasn't in place, the HOA would have to issue a special assessment, a one-time fee. The members, like you, would have to pay for the special assessment for the coverage of unexpected expenses.
Because of this risk, the majority of HOAs carry insurance. However, not all of them do.
Who Carries HOA Insurance?
Whether your HOA carries insurance depends on two things. One of these is your HOA's Covenants, Conditions, and Restrictions, or CC&Rs. Many homeowners associations' CC&Rs require that the HOA take out insurance.
This is so that the HOA has protection against both litigation and costly repairs.
What state you live in will also impact whether your HOA carries insurance. Many states require homeowners associations to have a minimum insurance amount.
With this said, they might make an exception for expensive insurance types.
There is a variance in insurance laws by state. The majority of states do have a requirement that condo associations carry insurance. Far fewer, on the other hand, require all HOA types to carry insurance.
The states where insurance is mandatory for condominium associations include Idaho, Wyoming, Arizona, New Mexico, Texas, Nebraska, South Dakota, North Dakota, Missouri, Mississippi, Tennessee, Kentucky, Illinois, Wisconsin, Michigan, Indiana, Alabama, Georgia, South Carolina, Virginia, and Maryland, New Jersey, Rhode Island, Maine, and Hawaii.
The states where insurance is mandatory for homeowners associations include Washington, Oregon, California, Alaska, Nevada, and Utah. They also include Colorado, Minnesota, Ohio, North Carolina, Florida, West Virginia, Pennsylvania, Delaware, Connecticut, and Vermont.
As for the states that don't have any of these requirements, these include Montana, Kansas, Oklahoma, Arkansas, Iowa, New York, and Massachusetts.
What HOA Insurance Covers
If your homeowners association carries insurance, what the insurance covers will vary depending on the specific policy and whether you inhabit a condominium or a subdivision.
Whether you inhabit a condominium or a subdivision will also impact how much coverage you'll need from your home insurance.
HOA Insurance Coverage in a Subdivision
If you inhabit a subdivision that consists mostly of single-family homes, HOA insurance coverage, at the very least, should include shared property damage, as well as personal injuries that happen on common property.
Additionally, a large number of homeowners associations carry D&O coverage. D&O stands for "directors and officers."
D&O provides coverage for the homeowners association in two situations; negligence by the board and financial mismanagement.
You'll find property damage coverage in nearly every homeowners association insurance policy. It's important to carefully review the specific policy your HOA carries, so you know what's covered. Generally, coverage for property damage is only for shared property.
In an HOA's context, this includes areas and facilities like recreational facilities, clubhouses, sidewalks, private roads, playgrounds, parks, and barbecue pits.
Also, if your HOA includes a village center that has restaurants, cafes, and other business types, damage to these places might be covered by your HOA insurance. HOA-covered property damage claims vary a lot.
Often, they include claims that are related to wind, theft, riots, fire, vandalism, storms, and negligence.
Usually, property damage won't cover your home. However, there are exceptions.
For example, say that the HOA's landscapers damage your patio. In this case, the homeowner association's master policy might cover repair costs.
Additionally, if you inhabit a townhome, there are certain things your HOA will likely cover, such as damage to shared walls and the roof. It also might include damage to fixtures and the exterior walls.
As stated previously, it depends on what specific policy your homeowners association purchased.
The other coverage type that is fairly standard with nearly every homeowners association insurance policy is personal injury. This coverage type covers liability claims that are related to injuries that occur on shared property. These injuries include:
- Dog bites
- Slips and falls
- Playground injuries
While this is rare, if the homeowners association is found liable, the policy sometimes covers injuries that happen on private property. For example, say that your homeowners association is responsible for clearing ice and snow from your driveway, as well as salting your driveway. If your HOA fails to fulfill these responsibilities, and someone slips causing them to have an injury, the HOA insurance might cover the claim's cost—despite the fact that the injury happened on private property.
Generally, the coverage of personal injury policies covers only residents and invited guests. If a trespasser has an injury that occurs on shared property, the HOA is usually far less liable. Again, this may vary from policy to policy.
For example, say that the HOA has an amenity that entices a child to make their way into the HOA - like a skatepark or playground. If the child isn't a guest or resident of the HOA, and they are injured using the facilities, the HOA may be liable. Exactly how liable the HOA is for that child's injuries will vary by state.
Additional Possible Insurance Coverage Types
Different homeowners association insurance policies include different coverage options. Your HOA's policy might include social host liability, for example. It's a good idea for your HOA to get this coverage if they have venues it rents out that people use for events where people are serving alcohol to others. This is because social host liability coverage covers claims others may make against the HOA for injuries that are related to the consumption of alcohol.
Another insurance coverage type your HOA's policy might include is discrimination claims insurance. The cost of a discrimination suit can be quite high if your HOA is being sued. This coverage helps in covering those costs.
There's also workers' compensation coverage. If your HOA hires employees, they'll need to provide workers' compensation, just as any other business would. Some homeowners associations will carry third-party vendors' workers' compensation, too.
Your HOA's policy might also include employee dishonesty bond coverage. This is because a D&O policy usually doesn't extend to employees. This is where this coverage comes in handy. It covers loss and theft costs if employees cause these issues.
Finally, there's garagekeepers coverage. If your homeowners association offers a garage for guest parking, they might have this coverage. Garagekeepers provides coverage to the vehicle owner and the HOA if the vehicle ends up damaged while it's parked in the HOA's garage.
What HOA Insurance Doesn't Cover
HOA insurance coverage is limited, usually, to common areas and shared property. If you inhabit a single-family home, then, generally, HOA insurance doesn't cover your property. However, as we mentioned earlier, if you live in a townhome, there might be some coverage for parts of your townhome's structure.
Regardless of whether the place you inhabit is a townhouse or a single-family home, HOA insurance, usually, doesn't cover injuries that occur on your own property.
Again, this rule has an exception. This is in the case in which the homeowner association's actions or inactions at least partly caused the injury.
A specific HOA insurance policy will have exclusions, as well, which you should look out for. Even if the policy provides coverage for your home, it might not cover every hazard out there.
The exclusions that are the most common include earthquakes, sinkholes, and flooding. Therefore, if one of these is a risk in the area where you live, you should consider getting supplemental insurance that covers that risk.
Keep in mind that floods, in the US, are the most common natural disasters that occur.
What Condo Association Insurance Covers
As compared to homeowners insurance in subdivisions, condo association insurance is usually more extensive. This is because condos usually have a larger number of shared areas that aren't usually in communities that are made up mostly of townhomes and single-family homes.
Examples of these shared areas include elevators, stairwells, and hallways.
Because of this, there are three different condo insurance types. Each of these types covers different structures in claims for property damage.
Bare walls-in is the most basic type of condo association insurance coverage. It covers only two types of damage. One of these types of damage is that which occurs to the building's exterior structure. The other is damage is that which occurs to common areas.
Walls-in is the most common condo association insurance type. This insurance type covers everything the prior category covers. Additionally, it covers individual units' walls, including the framing, insulation, wiring, drywall, and plumbing.
It might also cover cabinets, ceilings, and floors—as long as they haven't been modified.
This is the most extensive condo association insurance type. This insurance type covers everything the prior category covers. Additionally, it covers ventilation, security equipment, appliances, and modifications.
Personal Injury Claims (In Common Areas)
Just like homeowners association insurance in subdivisions, condominium association insurance provides coverage for personal injury claims (that occur in common areas). These include injuries that happen on or in places such as lobbies, hallways, and stairs.
These places also include recreational facilities, parks, sidewalks, elevators, or private roads.
What Condo Association Insurance Doesn't Cover
Unless it's all-in coverage condo association insurance, the majority of condo association insurance doesn't provide coverage for damage to appliances, modifications, ventilation, built-in fixtures, or security equipment.
Additionally, if an injury happens in your unit, it generally won't be covered by the policy of your condo association. However, there might be exceptions in some cases. An example may be a case in which the condominium association is in some way liable for an injury that happens in your unit.
Additionally, the majority of condominium association insurance won't cover damage that occurs to your personal contents. Examples of your personal contents include clothing, electronics, and furniture.
If you want to cover damage that occurs to your personal contents, you'll need to take out condo insurance of your own. The name of this type of insurance is an HO-6 policy.
There are additional things this policy type will cover in addition to the damage that occurs to your personal contents.
Typically, it will also provide coverage for the loss of the use of your apartment—plus what you'd have to pay for claims that are in excess of the coverage that you have from your condominium association's insurance. However, be careful of exclusions.
Just like with regular homeowners association insurance policies, there may be exclusions. There may be exclusions that are in both your HO-6 policy and your condo association insurance, leaving a gap in coverage.
Does HOA Insurance Cover Home Insurance?
Generally, the coverage you get with homeowners association insurance doesn't cover home insurance. As we mentioned above, if you inhabit a single-family home in your HOA, personal property damage usually won't be covered.
If you inhabit a townhome in your HOA, shared structure parts may be covered. However, generally, nothing within the townhome units will be covered.
It's only in the case in which you inhabit a condominium that the HOA insurance your condo association has might potentially provide coverage for damage that occurs to your individual structure's unit.
However, even though most homeowners association insurance policies won't provide coverage for your home, it's still the case that many HOAs require their members to get it.
One of an HOA's jobs is to attempt to maintain property values. If a member of the HOA were not to not have enough insurance to repair damage to property that occurred to their home, this could cause an issue with property values.
This could cause a decline in property values for the entire community. Therefore, to prevent this from occurring, an HOA will often require its members to get home insurance of their own.
Is It Required?
To find out whether your HOA has this requirement, take a look at their Covenants, Conditions, and Restrictions. Here, you'll be able to find out whether it's a requirement or not.
Additionally, it's good to check what your state requires. The majority of states require that condominium associations have insurance. More and more, they're also requiring that all HOAs have it.
Most mortgage lenders will also require home insurance. Because of this, it shouldn't be too much of a hassle if your HOA requires you to carry home insurance as well.
What Happens When There's an HOA and Home Insurance Overlap?
Some coverage overlap is possible—especially in condos. If this occurs and you find that you're in a situation where making a claim is something you need to do, you'll need to notify your own insurer and your HOA. Together, they'll determine which of the two policies will cover the damage.
Generally, it's best to get the homeowners association insurance to cover the claims before you utilize your own insurance. This will help you in avoiding an increase in premium.
To learn how much your premiums might increase, you can get in touch with a home insurance provider.
Want to Get Insurance?
Now that you've learned about HOA insurance, you might want to get an insurance policy for your HOA. Maybe you're thinking of getting home insurance so that you can be sure to be covered if damage to your individual home or unit occurs.
We can also help you with other types of insurance including commercial, car, health/medical, and farm/agricultural insurance. To learn more about the different insurance options we offer or to get an insurance quote, contact us now.