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HOA insurance is a type of commercial property insurance that is paid for by the fees you pay to your homeowners association (HOA). It covers physical damage to buildings and common areas managed by your HOA, as well as certain liability expenses.
What is an HOA?
A HOA is a membership organization that operates for the benefit of a community, where residents pay fees in exchange for certain services. Governed by a board of directors elected by community residents, the HOA ensures that common areas are maintained and enforces agreements that preserve the face of the community.
Detached House HOAs
Single family HOAs aim to maintain an aesthetically pleasing look in a neighborhood. This is accomplished by charging homeowners fees for the maintenance of common areas and by overseeing the operation and maintenance of shared community facilities such as parks and swimming pools.
HOAs in single-family neighborhoods may also have specific rules for members, such as: B. Requirements for homeowners to have a specific type of mailbox, shade of clapboard, or color of paint for the exterior of their home.
Condominium HOAs are tasked with overseeing the upkeep and maintenance of the condominium building as well as the common areas used by the condominium residents. Condominiums may also have their own rules regarding the use of common areas shared by owners.
HOAs take out insurance to cover the cost of repairs to the areas and structures they manage, as well as liability coverage for injuries that occur in common areas such as swimming pools. HOA board members handle the purchasing of HOA insurance and pay policy premiums using funds from dues paid by their members. Because HOA members have equal access to common areas, they pay an equal share of the HOA insurance policy.
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How does HOA insurance work?
HOA insurance – often referred to as a general 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 facilities governed by the HOA. This can include community pools, parks, playgrounds, ponds, gardens, clubhouses and fitness areas.
A typical condo HOA framework policy covers everything outside of your condo, like the building—including the exterior walls and roof—and shared spaces like stairwells, hallways, elevators, and the lobby.
A condominium company’s main policy can be one of two types:
All-in Condo Master Policy
This broader policy covers the exterior of the building and some interior elements such as appliances, carpeting, plumbing, and wiring. It does not cover your personal items such as furniture and clothing.
Bare Walls Condo Master Policy
This type of policy only insures the bare structure of the condominium building. It does not cover anything inside a unit’s walls or your personal belongings. Some bare wall guidelines cover plumbing and electrical systems.
HOA insurance also covers injuries that occur in public areas. For example, if a parent sued the homeowners association for damages after their child broke a leg in the community playground, the main policy would cover the HOA’s legal defense and all settlements up to the policy limits.
What does HOA insurance cover?
HOA Insurance provides coverage for physical damage to HOA managed structures and common areas, as well as liability costs associated with those areas.
Physical Damage Coverage
Physical damage coverage pays to repair or replace damage in public areas such as parks and playgrounds.
For condos, property damage coverage also protects against damage to the outside of the condo building (e.g., lost roof shingles) and in common building areas such as stairwells and basements.
HOA insurance typically covers damage caused by natural disasters, fire, storms, and vandalism.
General liability includes the legal defense of the HOA and any settlement or judgment when 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 result in a costly lawsuit.
Adequate HOA insurance ensures that the HOA does not have to impose heavy assessments on members to cover the costs.
What does HOA insurance not cover?
HOA insurance does not cover property damage or liability for personal injury occurring on your own property or in your home or condo. It also typically excludes coverage for damage caused by floods or earthquakes.
HOA insurance does not cover:
- Physical damage to your home
- Physical damage inside your condo
- Personal items that have been damaged or stolen
- Physical damage to common areas caused by an earthquake
- Liability costs for which you are responsible, such as B. Damage caused by your child
- Claims that exceed the limits of the HOA insurance policy
HOA insurance does not also cover your personal property if it is stolen in a common area. You must contact your own home insurance or condo insurance for this coverage.
If your car is stolen from the community pool car park you will also need to contact your comprehensive car insurance for coverage.
Do I need HOA insurance?
Most HOAs are required by their charter to have at least some insurance, and many states require HOA insurance. For example, Arizona requires:
- Property damage coverage for community property of at least 80% of the value of the property
- General liability insurance at an amount to be determined by the HOA Board
HOA insurance provides financial protection for shared facilities and property against natural disasters, vandalism, and liability claims. Without it, members of an HOA could be held personally liable for damages related to the use of common areas. Some states provide limited liability for HOA members, but make this conditional on the HOA having adequate insurance.
HOA board members should ensure that the master policy has adequate coverage. If the main policy includes a flood exclusion, you should consider purchasing main flood insurance. If earthquakes are a problem in your area, consider getting earthquake insurance.
It is wise to review a HOA insurance policy each year to determine if any changes or increases in coverage need to be made.
HOA vs. home or homeowners insurance
While HOA insurance pays for property damage and liability costs shared by a community, your own homeowners or condo insurance pays for damage to your home and property. Your policy also covers your legal defense and settlements if you are sued for an accident for which you are responsible (even if that accident occurs in a public area).
For example, HOA insurance would cover HOA’s legal defenses if someone sued after injuring themselves at the community pool, but your own homeowners insurance policy would apply if someone sued you because your dog bit them at the community park.
Traditional homeowners insurance also pays for repairs and replacements for damage to your home and replacement of your personal belongings following an insured loss. If a tornado devastates your neighborhood and destroys your home and all your belongings, the home structure and your personal belongings will be covered by your homeowners insurance policy. HOA insurance would cover physical damage sustained to shared structures in the neighborhood, such as: B. a clubhouse or a community fitness center arise.
For condominium owners, a master HOA insurance policy covers the exterior of your building and the common areas that are shared. You need your own condo insurance to protect the inside of your unit. Like homeowners insurance, condo insurance covers your personal belongings (such as furniture, clothing, televisions, and dishes) and provides liability protection. It also offers protection for interior walls if damaged, e.g. B. in case of fire.
Related Types of Insurance
Additional living expenses
Typically found in the ‘loss of use’ section of a home insurance policy, your supplemental living expenses coverage will pay for living elsewhere while your home or condo is damaged due to an insured loss, such as a fire. B. a fire is repaired.
Loss assessment coverage
This optional coverage helps cover costs in situations where condominium homeowners insurance does not. Suppose a fire damages the elevator in your condo building, causing $350,000 in damage. If the HOA framework policy provides $300,000 of coverage for the building structure, $50,000 remains uncovered. The condominium could split these remaining costs among the condominium owners of the building. Claims insurance can cover these additional costs so you don’t have to.
Coverage of health insurance payments
This coverage pays for minor injuries that happen in your home or apartment, regardless of who is at fault. The limit for health insurance is usually $1,000 to $5,000.
Related: What does homeowners insurance cover?