What is a homeowners association master insurance policy?

A homeowners association (HOA) master insurance policy covers common areas and shared structures within a community governed by an HOA. This policy is typically purchased by an HOA board to protect structures, amenities, and other shared spaces such as swimming pools, parking garages, and landscaping. The master policy is essential for maintaining the community’s financial stability, ensuring that the HOA can cover the costs of repairs or replacements in the event of damage or loss.

How much does an HOA master insurance policy cost?

The cost of an HOA master insurance policy varies based on several factors:

• Property size. Larger communities with more amenities may face higher premiums due to increased risk exposure.​
• Property value. The amount of coverage needed to insure higher-valued properties may result in larger premiums; lower property values may be more affordable to insure.
• Location. Areas prone to natural disasters, such as wildfires or hurricanes, may incur higher insurance costs. For instance, communities in California have experienced significant premium increases due to heightened wildfire risk.
• Coverage type. All-in coverage policies generally have higher premiums than bare-walls coverage due to the broader protection they offer.​
• Claim history. Communities with frequent claims may be deemed higher risk, leading to increased premiums.

HOA officers must review policies regularly and shop around to ensure they are receiving comprehensive coverage at competitive rates.​

Note that if your home is governed by an HOA, some or all of the HOA’s insurance policy may be paid for by your monthly fees.

What does an HOA master insurance policy cover?

An HOA master insurance policy typically includes:​

• Property damage coverage. Protects against damage to common areas from events like fire, storms, or vandalism.​ Depending on the policy type, this may include building exteriors, roofs, hallways, elevators, lobbies, and community amenities like pools or tennis courts.
• Liability coverage. Offers protection if someone is injured in a common area and decides to sue the HOA.​ This might include slip-and-fall accidents in lobbies or injuries at community facilities.

It’s crucial to note that while the master policy covers common areas, it typically does not cover personal belongings or interior elements within individual units. Residents should obtain condo or homeowners insurance policies to protect their personal property and the interior of their units.

What type of HOA master policy do you need?

The appropriate policy type depends on the community’s governing documents, state laws, and the association’s specific needs. Condominium associations typically require more comprehensive coverage than HOAs governing single-family homes, where individual homeowners are more responsible for their structures.

“HOA insurance varies from HOA to HOA depending on the CC&Rs, but generally speaking, the master HOA policy covers exterior walls, roofs, foundations, and any shared interior walls,” said Sarmad Naqvi, vice president of real estate at Woodruff Sawyer, an independent insurance broker in San Francisco. “The liability part of the insurance policy extends to all common areas. The unit owner insurance (HO-6) always covers personal property and upgrades for each unit owner. Depending on the HOA, the unit owner policy may also need to cover walls-in.”

The most typical types of HOA policies are as follows:

Bare walls-in coverage

The most basic form of coverage, this policy only insures the structure and common areas. It excludes anything within the walls of individual units, including fixtures, improvements, and personal property. Unit owners are responsible for insuring everything from the drywall inward.

Single-entity coverage

Also called walls-in coverage, this middle-ground option covers the original fixtures in individual units as they were initially installed, including cabinets, flooring, and built-in appliances. However, it doesn’t cover upgrades, improvements, or personal belongings. This is the most common type of master policy for condominiums.

All-in coverage

The most comprehensive option, all-in policies (sometimes called all-inclusive policies) cover nearly everything in the building, including improvements made by unit owners. Personal property still requires separate coverage through individual policies.

How to choose the best HOA master insurance policy for your needs

Choosing the best HOA master insurance policy requires careful consideration of the community’s needs and a thorough understanding of the available coverage options. The HOA board should start by conducting a risk assessment to identify potential hazards and determine the level of coverage needed. This may include evaluating the condition of the buildings, the value of the common areas, and the potential for natural disasters or other risks.

“One of the biggest challenges with HOAs is the boards themselves are not insurance experts, and they often need to explain the insurance requirements to the other unit owners,” Naqvi said. “This often leads to misunderstandings and gaps in coverage. This compounds when unit owners turn in small claims on the master HOA rather than on their individual HO6 policies. That leads to coverage cancellation and skyrocketing insurance premiums.”

The board should obtain quotes from multiple insurance providers and compare the coverage options, premiums, and deductibles. It’s important to work with an insurance agent who has experience with HOA master policies and can provide guidance on the best options for the community.

The board should also review the policy carefully to ensure that it includes all necessary coverage and that there are no gaps or exclusions that could leave the community vulnerable. For example, the policy should cover both property damage and liability and include coverage for any risks the community faces, such as flood or earthquake damage.

HOA master insurance vs. individual condo or homeowners insurance

A way to think about the difference between homeowners association coverage and homeowners insurance or condo insurance is that the former protects a community governed by the HOA, while the latter protects homeowners. The HOA master policy covers common areas and shared structures within the community, while individual insurance policies cover personal property and the interior of individual units.

For example, if a fire damages the exterior of a condominium building, the HOA master policy would cover the cost of repairing the structure. However, if the fire also damages the interior of a specific unit, the homeowner’s insurance policy would cover the cost of repairing or replacing personal property and any interior finishes.

In some cases, the HOA master policy and individual insurance policies may overlap. For example, if the HOA master policy includes “all-in” coverage, it may cover built-in fixtures and appliances within individual units. In this case, the homeowner’s policy would only need to cover personal property and any upgrades or improvements made to the unit.

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