Blanket insurance

What is blanket insurance?

Blanket insurance is a type of insurance policy that insures the common areas of a condominium or townhome. It also covers the common property in an area governed by a homeowner’s association, or HOA.

Deeper definition

When you purchase a home, you must take out a homeowner’s insurance policy. This insurance covers your home and the belongings inside it, if a natural disaster or theft occurs.

If there are areas in your neighborhood or condominium complex that all of the residents own and benefit from, your homeowner’s insurance does not cover these sites. Instead, your HOA has to take out a blanket insurance policy to protect these areas from theft or damage.

Each resident of the condominium or neighborhood pays his or her portion of the blanket insurance policy. HOAs typically have required monthly or quarterly dues that help maintain, repair, and improve common areas. The dues also should include the homeowners’ part of the blanket insurance premium.

Blanket insurance is never a substitute for homeowner’s insurance. Rather, it is intended to enhance your personal insurance policy to ensure that all of the areas you have a financial interest in are protected from disaster.

Blanket insurance example

Many homeowners will have blanket insurance at some point in their lives. For example, you may decide to buy a condominium that has a pool, playground and tennis courts on the premises.

To insure these common areas, each individual who lives in the condominium complex must pay a fee, perhaps $30 per month, to cover his or her portion of the blanket insurance policy.

If a violent storm rolls through and causes thousands of dollars in damage to the pool and playground, the HOA will make a claim on the insurance policy, and the blanket insurance will pay to repair the damage in these common areas.

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