Being a part of a homeowners association (HOA) can come with a lot of benefits, such as access to a shared pool or gym and the assurance that your neighbors are going to keep their properties up to standards. But it has one definite drawback: the fees.
Those pesky recurring fees enable your HOA to maintain common areas and enforce neighborhood rules and maintenance standards. And they also go towards HOA insurance. This is coverage your HOA buys to help them repair any damage to common areas (if you’re in a condo, that includes the exterior of your building) and protect your HOA — and, as a result, you — against liability claims.
In other words, HOA insurance works a lot like homeowners insurance, covering property damage and liability. But not all HOA policies are created equal. So you know exactly where your HOA fees are going, don’t hesitate to ask your HOA for your policy details.
What is an HOA?
Before we get into more details about what your HOA policy may and may not cover, we want to make sure we’re all talking about the same thing. A homeowners association, or HOA, is an organization led by an elected leadership team that oversees and controls certain aspects of your condo, subdivision, or other planned community.
The people who make up your HOA’s board are responsible for maintaining the shared spaces within your HOA, whether that’s a clubhouse, pool, tennis court or park. They also set rules that are designed to improve your HOA, like parking stipulations or guidelines on landscape maintenance, and they might provide security services. Your HOA might even have control over which color you can paint your home or condo. All told, their goal is to create a cohesive, safe, well-functioning neighborhood where you enjoy living. And to help them do that, you pay an HOA fee.
That fee helps your HOA keep your neighborhood beautiful, your shared spaces well-maintained, and your HOA protected with an HOA master policy.
Why should you pay for their insurance? It’s important to clarify that your HOA’s master policy protects you as much as your HOA. If unexpected expenses arise for your HOA that aren’t covered by your member dues, they can pass that cost on to you in the form of a special assessment. Keeping your HOA insured minimizes your risk for special assessments, especially high-dollar ones.
What is an HOA master policy?
Your community’s master policy is insurance your HOA buys to keep themselves covered. And this doesn’t just serve your HOA. It also protects you from having to cover the cost of liability expenses or repairs to common areas passed along to you in the form of special assessments.
All HOA master policies cover two things:
- Property damage: The master policy protects the common areas much the same way homeowners insurance protects a home. If a covered cause like a fire or wind incident damages a shared space for which your HOA is responsible, this portion of the policy can cover the repairs.
- Liability: Let’s say someone slips by the pool and decides to sue your HOA. You better bet that lawsuit won’t be cheap, probably so much so that member dues won’t be enough to cover it in full. The liability portion of your HOA’s master policy protects you from a special assessment to cover the cost of defending your HOA in court.
HOA insurance vs. condo insurance
When you own a home within an HOA, the lines between your homeowners insurance and your HOA’s master policy are pretty clear. You cover your house, they cover the shared spaces. Easy.
But when you live in a condo, things are more complicated because you and the other condo owners share the actual structure of your condo. There are a couple of different types of condo HOA insurance. It’s important to know which type your HOA has so you buy the right amount of condo insurance for yourself without overpaying to protect something that’s already covered by your HOA.
The two main types of condominium insurance your HOA can buy are:
- Bare walls coverage: Because the walls of your condo are shared, it would be tricky to have you and your neighbors cover them. Do you insure half the wall and your neighbor covers the other half? So you can skip this headache, your condo buys bare walls coverage. This is a policy that insures the structure of your condo, or the bare walls and everything in them like plumbing, wiring and insulation.
- All-in coverage: This type of policy takes your HOA insurance even further, covering everything a bare walls policy covers plus installed features in your condo like your appliances and countertops. If your condo has all-in coverage, make sure you get the details on exactly what it covers so you don’t double-cover (and double-pay to insure) aspects of your condo.
HOA insurance and homeowners insurance
Cool, you might be thinking. If my HOA’s got me covered, I don’t really need to worry about insurance, right? Wrong. Even in the event you live in a condo and your HOA has all-in coverage, you still need to protect your stuff and liability (in this case, look into an HO6 policy).
But if you own a free-standing, single-family home, don’t assume your HOA insurance will protect it in any way. You’re still going to need to get a full homeowners insurance policy.
Long story short, if you’re paying HOA fees, you’re going to get some protection out of them in the form of HOA insurance. But policies vary widely so don’t hesitate to ask your HOA where you’re protected — and where you aren’t.