A Homeowner’s Association is a double-edged sword.
You have to pay membership dues and adhere to certain rules and guidelines. In return, you often get access to amenities, a neighborhood with well-kept yards and perhaps avoid neighbors that throw late-night parties with loud music.
When it comes to insurance, sometimes an HOA for a condominium will even cover certain elements of your condo in addition to the shared amenities.
How do you know what the HOA insures vs. what you need to insure on your own? That’s what a listener of the Clark Howard Podcast recently asked.
How Much Additional Homeowners Insurance Do I Need If My HOA Provides Coverage?
An HOA manages my condo and provides some insurance. How much additional coverage do I need to buy on my own, if any?
That’s what a listener wondered on the Aug. 10 podcast episode.
Asked Jennifer in North Carolina: “I live in a condo on the North Carolina coast in a HOA community.
“Recently you suggested having a high deductible [for homeowners insurance]. Since some of my homeowners insurance is covered by my HOA, I am thinking that I might not need as much insurance.
“What would be some examples of major claims I would be responsible for that would not be covered under the HOA master homeowners plan?”
There are three major categories of HOA-provided condo insurance (also called “master condo policy,” “condo association insurance policy” or “HOA master insurance policy”).
I’ll get into the details of each of those three categories, and what they insure, later in this article. But the only way to know the answer to Jennifer’s question is to examine the bylaws of your HOA closely.
“Every condo has virtually unique wording on what is the responsibility of the unit owner and what is the responsibility of the association,” Clark says.
“[The wording] determines what coverage you have to have of your own vs. what [you get] through your [condo’s] monthly association dues.
“So you have to go to your actual docs to see what exposure you face.”
What Your HOA Condo Insurance Policy Covers
Back to Jennifer’s question. What does an HOA master insurance policy cover?
Typically, standard HOA insurance policies for condominiums include liability coverage, protection for amenities and the exterior of the building in which you live.
Some examples of things that those policies typically cover include:
- Parking lots/garages
- Swimming pools
- Tennis courts
Beyond that, there are three big categories of HOA insurance policies. Depending on which type your HOA offers, you’ll get more or less coverage.
Keep in mind this is just an explainer of how these policies may work. As Clark mentioned, you’ll have to dig into your HOA’s specific bylaws and documents to know exactly what your condo HOA insurance policy covers.
- Bare walls coverage: The most basic type of condo HOA insurance. It covers anything beyond the interior walls of your condo, including the drywall, studs and insulation.
- Walls-in or original specs coverage: Besides the standard bare walls coverage, these policies often add coverage for original flooring, cabinets and bathroom fixtures.
- All-in coverage: The most expansive condo HOA insurance available, you typically get coverage for built-in appliances.
What an Individual Condo Insurance Policy Covers
Even if you have a comprehensive version of HOA condo insurance, there’s a major category that isn’t covered: your stuff.
You need an individual condo insurance policy even if you have an HOA. What you’ll need to include in your policy may vary based on what your HOA provides. But you will need or may need coverage for:
- Injury liability inside your condo
- Bathroom fixtures
In many cases, you will be responsible for anything inside the condo that takes damage. That includes damage from a fire, hurricane, tornado, flood or break-in.
That’s why it’s important to buy an individual condo insurance policy.
“If the unit takes substantial damage inside the unit, a lot of that repair is going to come on you, not to the association,” Clark says.
“So that [individual] condo policy is important and is valuable to you.”
Location Matters for Condo Insurance Just Like for Homeowners Insurance
Your residence could be more or less at risk depending on where you live.
For example, a house built on the coast of a state susceptible to hurricanes, in a flood-prone area, is going to be more expensive to insure. It’s one of the reasons why homeowners insurance is so expensive in Florida.
Homeowners insurance exists to insure against catastrophe. If a natural disaster wipes out your house, you want insurance in place to prevent what could otherwise be a crippling financial disaster.
Individual condo insurance policies serve the same purpose. And depending on where you live, your risk is higher or lower.
“You live on the North Carolina coast which has had bad outcomes from a series of hurricanes,” Clark says. “And homeowners insurance becomes more dicey. In your case, it’s a condominium owner’s policy.
“It’s still to your advantage if you can afford it to self-insure for as much as is reasonable in your life. But because of the heightened risk of your location, taking on a higher deductible is a really good idea.”
Higher deductibles can help lower or limit the premiums you pay for your insurance policies.
Always check your condo HOA documents to understand what the HOA insurance policy actually covers.
No matter what, you’ll want an individual condo insurance policy. In most cases, you’ll need to insure most or all of what’s inside your condo walls.