What Does a Condo Association Insurance Policy Cover? [Insights]

A condominium association's master insurance policy is crucial in protecting the shared elements and structures of a condo building or community. But what exactly does this type of policy cover? As both condo boards and individual owners look to safeguard their investments, it's important to understand the scope of HO-6 insurance and how it differs from individual homeowners insurance policies.

In this comprehensive guide, we'll break down the key details of what a condo association's master policy insures, what's left for owners to cover themselves, and how to ensure your condo and assets have full protection.

Key takeaways

• A condo association's master policy provides insurance coverage for the physical building structures and shared common areas that the association collectively owns.
• This includes the foundations, exterior walls, roofing, lobbies, hallways, and amenities like pools and fitness centers available to all owners and residents.
• The policy covers property and casualty damage to these collective common elements and liability claims for injuries or accidents that occur in common areas, which the association is responsible for maintaining and managing.
• Theft or embezzlement of funds by employees, fraud, and other crime-related losses are also covered risks under a standard condo association policy.
• If units are rendered uninhabitable due to a covered incident, the policy may pay additional living expenses for temporary housing while repairs are completed.
• Rebuilding costs after a major disaster may exceed the condominium association insurance coverage limits, so loss assessment coverage helps pay assessments charged to owners to cover the gaps.
• Depending on the association's approach, higher condo association insurance coverage policies may extend into units to include original cabinetry, flooring, and fixtures.
• Standard policies, however, exclude earthquake and flood damage, personal possessions within units, and liability claims arising within individual units - requiring coordination with HO-6 policies.

What is a condo association master insurance policy?

A condo association master policy, called an HOA insurance policy, provides coverage for all shared common areas and amenities within a condo building or complex.

This includes lobbies, elevators, parking lots, recreational facilities like pools and tennis courts, and the physical exterior structure of the building itself. The premiums are paid out of condo association fees collected from all owners. The master policy covers damages and liability for these collective common spaces in which individual owners are interested.

It differs from the personal condo insurance policies each owner purchases separately to cover their unit interiors and contents. The master policy provides broad coverage for the building, while owners' policies look after unit-specific risks. Some master policies extend further into units to include original drywall, fixtures, and appliances as part of 'all-in' coverage.

But, basic policies do not stop at the unit walls. For comprehensive protection, it is key for both association and individual policies to work together.

Condo association insurance policy types

There are a few main types of insurance for condo associations to purchase to cover their shared elements, with varying levels of coverage:

Bare walls coverage

A bare walls policy covers just the basic physical building structure itself. This includes the shared structural foundations, exterior walls, roofing, etc., for which the association is responsible. Owners insure everything inside their units, including surfaces, fixtures, systems, and possessions, under their HO-6 policy.

All-in or single-entity coverage

This provides more extensive coverage of common elements. It may cover interior unit items like original flooring, cabinets, and fixtures that are part of the building's original design. Owners would still insure personal belongings, upgrades, and liabilities.

Modified or middle-ground policies

Many condo association policies fall somewhere between bare walls and all-in coverage. Associations select a customized mix of coverage limits and extensions best suited for their buildings and owners' needs.

Condo association insurance vs. condo unit owner insurance

The condominium association master policy, often referred to as HOA insurance, covers the shared, common elements across the entire condo property. This includes the physical building, amenities, equipment, etc.

Meanwhile, individual condo unit owners purchase separate HO-6 insurance to cover their interior living space, possessions, and liabilities specific to their unit.

While there is some overlap in coverage, the two policies are designed to complement each other:

Condo Association Master Policy Typically Covers:

• Building exterior, shared spaces, equipment
• Property and liability for common areas
• Loss of association income
• Equipment breakdown, water damage

Individual HO-6 Policy Typically Covers:

• Unit interiors and finishes
• Personal property and possessions
• Living expenses if displaced
• Liability claims within the unit
• Unit-specific systems, upgrades

Both policies must work together, as the association policy handles shared risks, and the HO-6 policy handles individual unit risks. Reviewing both policies closes gaps in coverage.

Condominium association insurance - a guide on what’s included

Condo buildings face various property risks like theft, vandalism, fires, and storm damage. A condo association master policy provides coverage for the shared building structures, grounds, and common areas in which owners collectively share an interest. Standard policies generally include:

Building property coverage

This protects the physical condo structure, including walls and fixtures, against property damage from covered events. While individual unit owners are responsible for insuring the interiors of their units, the association policy protects the building's exteriors and shared elements. For example, it covers the costs of rebuilding and repairing damages to roofs, siding, foundations, and other exterior or structural parts of the condo if disasters, fires, storms, or other covered events impact them.

Liability protection

The policy provides liability coverage for legal expenses that arise when someone is injured on the condo grounds or in one of the common areas and decides to sue the condo association. For instance, if a resident slips and falls in a lobby or pool area that the association is responsible for maintaining, resulting in a personal injury claim or lawsuit, the liability coverage would pay for the legal costs and any covered judgments or settlements within the policy limits.

Common area loss coverage

Depending on the size and amenities of the condo property, common areas can include lobbies, elevators, hallways, recreational facilities like pools or fitness centers, parking garages, outdoor grounds, and more. The condo association master policy helps cover repair costs and losses if these shared spaces and amenities experience damage due to covered causes like fire, storms, vandalism, or pipe bursts. However, it's important to note the policy limits, applicable deductibles, and any coverage exclusions in the specific policy terms.

While individual association policies vary based on the insurance company, state regulations, and customized coverages selected, these three areas—building property, liability, and common areas—form the core protections included in most standard condo association master policies.

They provide the association and community with financial safeguards against some of the most common and potentially costly losses condos can incur from property damage and personal injury lawsuits.

What’s not included in a condo association insurance policy

While condo association policies provide broad coverage for shared elements, some key exclusions in insurance fall outside the scope of the master policy. These gaps are important for associations to communicate to owners, as they must be covered under the individual HO-6 policies each owner carries. Personal liability insurance is essential for owners to cover accidents or injuries occurring within their units.

Typical exclusions not covered by the association policy include:

• Interior unit damage: The HO-6 policy covers damage inside the unit walls.
• Personal property: The HO-6 policy insures owners' possessions like furniture, clothes, jewelry, and electronics.
• Living expenses: The HO-6 pays additional living costs if owners are displaced.
• Loss of rental income: The HO-6 covers lost rental income from tenant-occupied units.
• Liability within units: The HO-6 covers injuries/damage inside individual units.
• Unit-specific upgrades: Betterments made by owners need HO-6 coverage.
• Mold remediation within units: The HO-6 covers mold treatment and removal.
• Earthquake damage: Typically excluded, may need separate endorsement.
• Flood damage: A separate flood insurance policy is usually required.
• Water backups: Caused by external events so often excluded.

Reviewing exclusions underscores the importance of coordinating association and HO-6 policies to avoid critical coverage gaps for owners and the community.

Still have questions?

Want to know even more about what a condo association insurance policy covers? Here are some of the most frequently asked questions to help clarify key details.

What does a condo HOA cover, and what is the difference between an HOA and a condo association?

While their names sound similar, homeowners associations (HOAs) and condominium associations are different legal entities with distinct insurance needs:

1. Homeowners associations (HOAs) are single-family home communities and neighborhood membership organizations. HOAs manage amenities like pools, parks, trails, and community centers shared collectively by homeowners.
2. Condominium associations manage the joint structural elements and common spaces of condominium properties comprising stacked units under collective ownership.
3. HOAs deal with fewer structural risks compared to condos. HOAs may take out specialized liability insurance policies for pools, playgrounds, etc., but homeowners insure their own dwellings.
4. Condo associations insure the entire physical building and all common elements with a master policy. Individual condo owners buy HO-6 policies to cover their interior living space and contents. The condo association policy starts behind the interior unit walls.

So, while HOAs and condo associations involve joint ownership of amenities, condos share structural risks that require robust master policies—a key difference from HOA insurance needs.

How many board members are required for a condo association?

The number of board members governing a condominium association can range from as few as 3 directors to as many as 7 or more, depending on the community size. While state condominium laws outline minimum and maximum board size, the association's bylaws typically state the specific number. Typical board roles include:

• President: Presides over meetings, serves as liaison, and oversees operations.
• Vice President: Assumes the president's role when absent and handles delegated tasks.
• Secretary: Manages documentation like meeting minutes, membership lists, and required filings.
• Treasurer: Oversees finances, including budgets, bank accounts, investments, bills, and taxes.
• General Members: Have equal director powers and may be assigned specific tasks.

Term lengths for board positions are usually outlined in the association's bylaws, often 1-3 years before re-election is required.

For smaller associations with fewer than 50 units, three board members are often adequate and maybe the legal minimum. This allows for the core positions of president, secretary, and treasurer to be filled. However, limiting to 3 directors means few back-ups if an unexpected vacancy occurs. It also concentrates decision-making on fewer people.

5 to 7 board members are more commonly recommended for mid-size and larger communities. This provides a greater balance of viewpoints, spreads workloads, and offers flexibility to form committees. If seven positions are filled, there may be roles like vice president and directors, in addition to the essential president, secretary, and treasurer.

Can a condo association insurance coverage be denied to a buyer?

While condo associations generally have the legal right to approve or reject prospective buyers before a sale closes, denying an interested purchaser comes with risks.

For an association to deny a buyer, the condo's governing documents must clearly outline screening procedures and objective criteria for rejecting applications. These often include:

• Financial qualifications - Requiring sufficient income or assets to afford maintenance.
• Credit checks - Reviewing creditworthiness and bankruptcy histories.
• Criminal background checks - Screening for felony convictions.
• Pet policies - Enforcing restrictions on pets.
• Occupancy limits - Capping the number of residents.

Denying a buyer without well-defined, non-discriminatory policies published in the bylaws or CC&Rs opens the association to fair housing lawsuits for discrimination.

Even with proper procedures, rejecting applicants should only be exercised cautiously based on legitimate concerns over financial means or lawful conduct - not personal preference. Consistent application of standards provides legal protection.

Is a master insurance policy required by law?

While condo associations are not universally required to have master policies by statute, most states outline some mandatory insurance provisions that apply to associations under their condo acts.

For example, Florida law states associations must use insurance proceeds to reconstruct damaged property and mandates minimum property coverage values. California requires associations to carry condominium association property insurance for common areas and commercial general liability.

Even without an explicit mandate, expert opinion overwhelmingly recommends associations purchase a master policy given the catastrophic losses at stake if shared elements are uninsured. Lenders also expect insurance when financing owners' mortgages.