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HOA insurance is the insurance your homeowners association buys for itself. Most people call it the master policy. It pays to repair the shared parts of the community, like the pool, the clubhouse and, in a condo, the building itself. It also protects the HOA if someone gets hurt in a shared area.
It does not cover your belongings. It does not cover you if someone sues you personally. And in many communities, it does not cover the inside of your unit or your house. That’s why the HOA has a policy and you need one too.
Exactly where the HOA’s coverage stops depends on two things: your community’s rules (the governing documents) and the policy itself. This article walks through how it usually works. For more, see our HOA insurance section.
What homeowners association insurance covers
The HOA buys the master policy and pays for it out of everyone’s dues, so you pay a share of it. It usually has two main parts:
- Property coverage. This pays to fix or rebuild things the HOA owns or must insure, like the clubhouse, pool, lobby, gym, fences and gates. In a condo, it usually includes the building structure, roof and shared walls too.
- Liability coverage. This pays if someone is hurt, or their property is damaged, in an area the HOA is in charge of.
How do you know what your HOA has to insure? Look in your CC&Rs (and, in some states, the state’s condo law). The CC&Rs usually have an insurance section that says what the HOA must insure, and a maintenance section that says who takes care of what. New to these documents? Start with how governing documents work.
HOAs also buy other policies to protect the HOA and its volunteer board, such as directors and officers (D&O) coverage and fidelity coverage. We explain those in the section on other HOA policies below.
Is HOA insurance the same as hazard insurance?
Not exactly. You’ll often see “hazard insurance” on mortgage paperwork. It simply means coverage for the building: the part of a policy that pays to repair or rebuild after damage from things like fire, wind or hail. The National Association of Realtors describes it as the part of a homeowners policy that protects the home and structures like a garage. It does not cover floods.
In an HOA, who carries the hazard coverage depends on the type of home:
- Condos. The HOA’s master policy usually covers the building. Fannie Mae, which sets rules for many home loans, requires a master policy for a condo project’s shared areas and buildings, unless the project’s documents make owners insure them instead.
- Houses in a planned community. Your own homeowners policy is the hazard coverage for your house. Fannie Mae’s rules treat individual policies as the normal setup here.
- Townhomes. It depends on your CC&Rs. More on that below.
Buying a condo and your lender wants proof of hazard insurance? Ask the HOA or its manager for a certificate of the master policy, and ask your lender if you also need an HO-6.
What condo association insurance covers
In a condo, the big question is: how far into your unit does the HOA’s policy reach? There are three common setups. The names get used loosely, so check your policy and CC&Rs for the real wording.
Bare walls coverage
The smallest amount of coverage. The HOA covers the building, the shared areas and things the HOA owns. It stops at the bare, unfinished walls of your unit. You insure everything inside: floors, cabinets, fixtures, appliances and wall coverings.
Single entity coverage
The middle option. It covers everything bare walls coverage does, plus the fixtures and finishes inside your unit as they were first built. Upgrades added later are usually up to you to insure.
All-in coverage
The broadest option, sometimes called all-inclusive. It covers the building plus the fixtures, upgrades and additions inside units. You still need your own coverage for your belongings, your personal liability and the cost of staying somewhere else after a loss.
Watch the deductible. No matter which setup you have, the master policy has a deductible, and it can be big. Many CC&Rs let the HOA pass some or all of it to the owner whose unit was involved in the loss, or split it among all owners.
Coverage in single-family and townhome communities
In a neighborhood of houses, the HOA’s property policy usually covers only the shared things: the clubhouse, pool, parks, entry features, perimeter walls and private streets. Its liability coverage applies to injuries in those shared areas. If a guest is hurt at the community pool, the claim would normally go to the HOA and its insurer.
You insure your own house and lot with a regular homeowners policy. The HOA’s policy won’t rebuild your home after a fire, and it won’t cover an injury in your driveway.
Townhome communities vary. In some, owners insure their own buildings, just like a house. In others, the CC&Rs make the HOA insure the building shells, and owners buy a condo-style policy for the inside. Your governing documents decide which.
Does HOA insurance cover fire?
Fire is one of the main things property insurance is meant to cover. The California Department of Insurance lists fire among the risks a homeowners policy usually covers, and Fannie Mae’s master policy rules include it too. The real question is whether the HOA’s policy covers the part of the property that burned.
- Condo: The master policy normally pays to repair fire damage to the building and shared areas, after the deductible. Your HO-6 picks up the inside items the master policy doesn’t reach, plus your belongings and extra living costs.
- House in an HOA: The master policy covers fire damage to the clubhouse and other HOA property, not your house. Your own homeowners policy covers your home.
How the owner’s HO-6 or homeowners policy fits around it
A condo owner’s policy is called an HO-6. People sometimes call it “walls-in” coverage. The California Department of Insurance residential insurance guide says it covers:
- Damage to the inside of your unit, and to upgrades your governing documents make you responsible for
- Your belongings
- Your personal liability, plus medical payments to others
- Loss of use: extra living costs if you can’t live in your unit after a covered loss
State law usually doesn’t require an HO-6, but you’ll often need one anyway. Some CC&Rs require it. Lenders often do too: Fannie Mae’s Selling Guide requires a unit owner policy when the master policy doesn’t cover the inside of the unit and its upgrades, or when the master policy has a per-unit deductible.
When you shop for an HO-6 or homeowners policy in an HOA, check these:
- Named perils or open perils. A named perils policy covers only the causes it lists, like fire, theft and vandalism. An open perils policy covers anything not specifically excluded. Either way, read the exclusions.
- Loss assessment coverage. This pays your share of some charges the HOA bills owners after a loss, for example when damage costs more than the master policy limit. Whether it also covers your share of the master policy deductible depends on your policy, so ask. The Department of Insurance guide also suggests checking how much it pays for earthquake losses.
- Flood and earthquake. Standard policies don’t cover either one. FEMA says most homeowners insurance doesn’t cover flood damage, and earthquake coverage is sold separately too. Ask whether your HOA carries either one. Don’t assume.
- Valuables. Standard policies usually limit what they pay for jewelry, art and similar items. If you have them, ask about listing them separately.
Who pays when damage crosses the line between unit and common area
Disagreements usually start when damage crosses from a unit into a shared area, or the other way around. Water is the usual example.
- If the roof leaks into a top-floor unit’s ceiling, the roof is normally the HOA’s to fix. Your policy covers your belongings and any inside items the master policy doesn’t reach.
- If the water came from an appliance or fixture you’re responsible for, your own policy is usually the first place to look. The HOA may also charge you its deductible if the governing documents allow it.
Which policy pays depends on what was damaged, who is responsible for it under the CC&Rs and what each policy says. Report the damage to both the HOA and your insurance company right away, and let the adjusters work out the split.
The other policies an HOA carries
The master policy is only one piece. Most HOAs carry five kinds of insurance. As an owner, the first two matter most to you. If you’re on the board, you’re responsible for all five.
- Property insurance. Pays to fix or rebuild what the HOA owns or must insure after a fire, windstorm or other covered loss. This is the part of the master policy described above.
- General liability. Pays if someone is hurt, or their property is damaged, in an area the HOA runs, like a guest slipping on a wet pool deck. It usually pays for the HOA’s lawyer too. See reducing HOA liability for the prevention side.
- Directors and officers (D&O). Pays when someone says the board made a bad decision, like enforcing rules unevenly or mishandling an election. It protects the HOA and its volunteers. It usually doesn’t cover fraud or deliberate wrongdoing, and a claim normally has to be reported while the policy is in force.
- Fidelity or crime insurance. Pays the HOA back if someone with access to its money steals it. The limit should be at least as big as the money that could be taken at once, which usually means the reserves plus a few months of dues. Make sure it covers volunteers and the management company, not just HOA employees.
- Workers’ compensation. Most states require it if the HOA has employees. Many HOAs without employees buy it anyway, because a hurt worker of an uninsured contractor may look to the HOA. More in workers’ comp insurance for homeowners associations.
Some HOAs add an umbrella policy for extra liability limits on top. Flood and earthquake are usually left out of standard property policies and have to be bought separately. Earthquake deductibles are often a percentage of the building’s insured value, so the board should know how the HOA would pay one before deciding whether to buy it.
A yearly insurance check for the board
- Start 90 to 120 days before renewal so there’s time to shop.
- Give your agent the governing documents and ask, in writing, whether the coverage meets them.
- Update the cost-to-rebuild estimate for buildings and improvements.
- Compare the fidelity limit to the current reserve and operating balances.
- Get certificates of insurance, including workers’ comp, from vendors before work starts.
Did the premium jump at renewal? See rising HOA insurance costs in California and the FAIR Plan.
In California
In California, start with your CC&Rs to see what the HOA must insure. On top of that, the Davis-Stirling Act (California’s main HOA law) adds rules that help you see where the HOA’s coverage ends:
- A yearly insurance summary. Every year, the budget report must summarize the HOA’s property, general liability, earthquake, flood and fidelity policies, including the insurance company, limits and deductibles. It must also warn owners that the HOA’s policies may not cover their property and that they might have to pay some or all of a deductible. (Civil Code 5300)
- Notice of changes. If one of those policies lapses or is canceled and not replaced, or changes in a big way, like a lower limit or a higher deductible, the HOA must tell every owner as soon as reasonably practicable. (Civil Code 5810)
- Who maintains what. Unless your CC&Rs say otherwise, the HOA takes care of the common area and each owner takes care of their own unit or lot. (Civil Code 4775) For a balcony or patio only you use (called “exclusive use common area”), the default is that you maintain it and the HOA repairs and replaces it. Who insures what usually follows the same line.
- Protection for owners. If someone sues over an injury only because owners share ownership of the common area, the lawsuit must be brought against the HOA, not individual owners, as long as the HOA carries at least $2 million in general liability insurance, or $3 million if the community has more than 100 units or lots. (Civil Code 5805)
- Theft coverage. Unless the CC&Rs require more, the HOA must carry crime, employee dishonesty or fidelity coverage for its directors, officers and employees worth at least its reserves plus three months of assessments. It must also cover computer fraud and funds transfer fraud and, if the HOA uses a management company, dishonest acts by that company and its employees. (Civil Code 5806)
- Protection for volunteer board members. A volunteer director or officer who meets the law’s conditions isn’t personally liable for certain negligence claims beyond the HOA’s insurance, but only if the HOA carries general liability and D&O coverage of at least $500,000 (100 or fewer units or lots) or $1 million (more than 100). (Civil Code 5800)
Our guide to the Davis-Stirling Act explains the budget report and the other notices boards must send.
For the full set of California requirements, see our guide to California HOA insurance requirements.
Do homeowners associations need insurance?
In practice, yes. A few things push HOAs to carry it:
- The CC&Rs. The insurance section tells the HOA what it must insure and how much.
- Lenders. Fannie Mae requires a master policy for condo projects, so buyers in an uninsured condo community may have trouble getting loans that follow Fannie Mae’s rules.
- California law. Civil Code 5805 (above) only protects individual owners from certain common-area injury lawsuits if the HOA carries the required liability coverage.
If a board lets coverage lapse, the HOA has to pay for a loss out of its reserves or a special assessment. Keeping the community insured is one of the core HOA board member responsibilities.
Before you buy or renew a policy
- Get the HOA’s current insurance summary or certificate. Write down the property limit and the deductible.
- Read the insurance and maintenance sections of your CC&Rs to see where the HOA’s responsibility ends.
- Give both to your insurance agent. Ask for a policy that starts where the HOA’s coverage stops, and ask how much loss assessment coverage makes sense given the master policy deductible.
Still not sure you need your own policy? Read do you need homeowners insurance if you live in an HOA?
An association’s master policy insures the property the association owns or is obligated to insure, along with the association’s own liability. It typically covers common areas, shared buildings and structures, and liability for injuries occurring in those areas. It does not cover owners’ personal property or personal liability, and in many communities it does not extend to unit interiors or individual homes.
The dividing line is set by the governing documents and the policy language, which is why both the association and each owner carry coverage. This overview addresses master policy scope, hazard and fire coverage, the three common condominium approaches, single-family communities and how the owner’s HO-6 or homeowners policy fits around the master policy. For related material, see our HOA insurance section.
What homeowners association insurance covers
The association purchases the master policy and funds the premium through assessments, so every owner shares the cost. The policy normally has two components:
- Property coverage for assets the association owns or must insure: clubhouse, pool, lobby, fitness room, fences, gates and, in a condominium, the building structure, roof and shared walls.
- Liability coverage for claims of bodily injury or property damage arising in areas the association controls.
Insurance obligations come from the governing documents and, in some states, the condominium statute. The insurance article of the CC&Rs sets out what the association must insure; the maintenance article allocates responsibility for each component. Boards reviewing these provisions may find our guide to how governing documents work useful.
Associations also carry coverage that protects the organization and its volunteers, including directors and officers (D&O) liability and fidelity coverage. See the section on other HOA policies below for a board-level overview.
Is HOA insurance the same as hazard insurance?
Not exactly. “Hazard insurance” is a lending term for property coverage: the portion of a policy that pays to repair or rebuild a structure damaged by causes such as fire, wind or hail. The National Association of Realtors describes it as the section of a homeowners policy protecting the dwelling and structures such as a garage. It does not include flood.
Where hazard coverage sits depends on the property type:
- Condominiums: The master policy generally insures the building. Fannie Mae’s Selling Guide requires a master property policy covering a condo project’s common elements and residential structures, unless the project’s legal documents assign that obligation to unit owners.
- Detached homes in a planned development: The owner’s homeowners policy provides the hazard coverage. Fannie Mae treats individual policies as the default for these communities.
- Townhomes: Determined by the CC&Rs, as outlined below.
When a lender requests proof of hazard insurance on a condominium, the owner should request a master policy certificate from the association or its manager and confirm with the lender whether an HO-6 is also required.
What condo association insurance covers
The key variable in a condominium is how far the master policy extends into the unit. Three approaches are common. Terminology is applied loosely, so the policy and CC&Rs control.
Bare walls coverage
The narrowest scope. Covers the building structure, common areas and association-owned property, generally stopping at the unit’s unfinished surfaces. Owners insure flooring, cabinetry, fixtures, appliances and wall coverings.
Single entity coverage
An intermediate scope. Adds the fixtures and finishes inside units as originally built. Later upgrades and improvements by owners generally remain the owner’s responsibility.
All-in coverage
The broadest scope, sometimes called all-inclusive. Covers the structure plus fixtures, improvements and additions within units. Owners still need coverage for personal property, personal liability and the cost of living elsewhere after a loss.
Deductible allocation. Under any approach, the master policy carries a deductible that may be substantial. Many governing documents permit the association to charge all or part of it to the owner of the unit involved in the loss, or to spread it across all owners. Boards benefit from confirming what their documents allow before a claim arises.
Coverage in single-family and townhome communities
In communities of detached homes, the association’s property coverage typically extends only to shared amenities and structures: clubhouse, pool, parks, entry features, perimeter walls and private streets. Its liability coverage responds to injuries in those areas. An injury to a guest at the community pool, for example, would normally be a claim against the association and its insurer.
Owners insure the home and lot under a standard homeowners policy. The master policy does not pay to rebuild a home after a fire, nor does it cover an injury in an owner’s driveway.
Townhome communities vary. In some, owners insure their buildings as detached homeowners would. In others, the CC&Rs require the association to insure the building shells while owners carry condominium-style coverage for the interior. The governing documents determine which model applies.
Does HOA insurance cover fire?
Fire is one of the basic causes of loss property insurance is written to cover. The California Department of Insurance lists fire among the perils a homeowners policy typically covers, and Fannie Mae’s master policy requirements include it. The operative question is whether the master policy insures the part of the property that was damaged.
- Condominiums: The master policy normally pays to repair fire damage to the building and common areas, after the deductible. Interior items outside its scope, personal property and extra living costs fall to the owner’s HO-6.
- Single-family communities: The master policy covers fire damage to the clubhouse and other association property only. The owner’s homeowners policy covers the home.
How the owner’s HO-6 or homeowners policy fits around it
The condominium unit owner’s policy is the HO-6, often described as “walls-in” coverage. According to the California Department of Insurance residential insurance guide, it covers:
- Damage to the unit interior and to improvements the owner is responsible for under the governing documents
- Personal property
- Personal liability and medical payments to others
- Loss of use, meaning extra living costs if the unit cannot be occupied after a covered loss
An HO-6 is not usually required by statute but is often required in practice, by the CC&Rs, by lenders or both. Fannie Mae’s Selling Guide requires a unit owner policy when the master policy does not cover unit interiors and improvements, or when it carries a per-unit deductible.
Key points when evaluating an HO-6 or homeowners policy in an HOA:
- Named vs. open perils. Named perils policies cover only the listed causes of loss, such as fire, theft and vandalism. Open perils policies cover any cause not specifically excluded. Review the exclusions in either case.
- Loss assessment coverage. Pays the owner’s share of certain assessments levied after a loss, such as when damage exceeds the master policy limit. Whether it applies to an assessment for the master policy deductible depends on the policy wording. The Department of Insurance guide also suggests checking how much it provides for earthquake losses.
- Flood and earthquake. Not covered by a standard policy. FEMA notes that most homeowners insurance does not cover flood, and earthquake coverage is sold separately. Confirm whether the association carries either.
- Valuables. Standard policies usually limit payment for jewelry, art and similar items. Scheduling them separately may be appropriate.
Who pays when damage crosses the line between unit and common area
Coverage disputes most often arise when a loss spans the unit and the common area, and water is the most common example. A roof leak into a top-floor unit is normally the association’s repair, while the owner’s policy covers personal property and interior items outside the master policy. Where the water originates from an appliance or fixture the owner is responsible for, the owner’s policy is usually the first to respond, and the association may charge its deductible to that owner if the governing documents allow.
The allocation turns on what was damaged, who is responsible for that component under the CC&Rs and the terms of each policy. Owners should notify both the association and their own insurer promptly and let the adjusters resolve the split.
The other policies an HOA carries
The master policy is one component of a broader program. Most associations carry five core policies. Owners are chiefly affected by the first two; the board is responsible for all five.
- Property: repair or replacement of property the association owns or must insure after a covered loss such as fire or wind. This is the master policy coverage described above.
- General liability: bodily injury and property damage claims arising from the association’s premises or operations, such as a slip on a pool deck, including defense costs. See reducing HOA liability.
- Directors and officers (D&O): claims alleging wrongful acts in governing the association, such as uneven enforcement or a mishandled election. Covers the association and its volunteers; generally excludes fraud and deliberate misconduct and is usually written on a claims-made basis.
- Fidelity or crime: reimbursement for theft of association funds. The limit should at least equal the funds exposed at one time, typically reserves plus several months of assessments, and should extend to volunteers and the management company.
- Workers’ compensation: required in most states for associations with employees, and often purchased by those without, since an injured worker of an uninsured contractor may pursue the association. See workers’ comp insurance for homeowners associations.
An umbrella policy adds liability limits above the underlying coverage. Flood and earthquake are generally excluded from standard property forms and purchased separately; earthquake deductibles are often a percentage of insured value, so the board should plan how a deductible would be funded before deciding on coverage.
Annual insurance review for the board
- Begin 90 to 120 days before renewal to allow time to market the program.
- Provide the governing documents to the agent and request written confirmation that the program meets them.
- Update replacement cost estimates for insured buildings and improvements.
- Compare the fidelity limit with current reserve and operating balances.
- Require vendor certificates of insurance, including workers’ compensation, before work begins.
If premiums increased sharply at renewal, see rising HOA insurance costs in California and the FAIR Plan.
In California
In California, the CC&Rs are the first reference for the association’s insurance obligations. The Davis-Stirling Act adds several requirements that clarify where the master policy ends:
- Annual insurance summary. The annual budget report must summarize the association’s property, general liability, earthquake, flood and fidelity policies, including the insurer, limits and deductibles, and must notify owners that the association’s policies may not cover their property and that they may be responsible for all or part of a deductible. (Civil Code 5300)
- Notice of changes. If a listed policy lapses, is canceled without replacement or changes significantly, such as a reduced limit or an increased deductible, the association must notify all members as soon as reasonably practicable. (Civil Code 5810)
- Maintenance defaults. Unless the declaration provides otherwise, the association maintains the common area and each owner maintains the separate interest. (Civil Code 4775) For exclusive use common area such as balconies and patios, the default is owner maintenance with association repair and replacement. Insurance responsibility usually follows the same allocation.
- Owner liability protection. A tort claim arising solely from an owner’s shared ownership of the common area must be brought against the association rather than individual owners, provided the association carries general liability insurance of at least $2 million, or $3 million for developments with more than 100 separate interests. (Civil Code 5805)
- Fidelity coverage. Unless the governing documents require more, the association must maintain crime, employee dishonesty or fidelity coverage for its directors, officers and employees of at least its reserves plus three months of total assessments, including computer fraud and funds transfer fraud, and extending to any managing agent or management company and its employees. (Civil Code 5806)
- Volunteer director protection. A qualifying volunteer director or officer is not personally liable beyond the association’s insurance for certain negligence claims, provided the association carries general liability and D&O coverage of at least $500,000 (100 or fewer separate interests) or $1 million (more than 100). (Civil Code 5800)
Our guide to the Davis-Stirling Act covers the annual budget report and the other disclosures boards must send.
For the full set of California requirements, see our guide to California HOA insurance requirements.
Do homeowners associations need insurance?
In practice, yes. Three factors drive it:
- Governing documents. The insurance article of the CC&Rs specifies what the association must insure and at what level.
- Lending. Fannie Mae requires a master property policy for condominium projects, so buyers in an uninsured condo community may have difficulty obtaining loans that follow those guidelines.
- California law. The owner protection in Civil Code 5805 applies only when the association carries the required general liability coverage.
A lapse in coverage leaves the association paying for a loss out of reserves or a special assessment. Maintaining appropriate insurance is a core part of an HOA board member’s responsibilities.
Before you buy or renew a policy
- Obtain the association’s current insurance summary or certificate and note the property limit and the deductible.
- Review the insurance and maintenance articles of the CC&Rs to identify where the association’s responsibility ends.
- Provide both to your insurance agent and request a policy that picks up at that point, including an appropriate amount of loss assessment coverage given the master policy deductible.
For owners still weighing whether a separate policy is needed, see do you need homeowners insurance if you live in an HOA?
Think of your HOA’s insurance as one very large umbrella. It’s held over the pool, the clubhouse and, in a condo, the building itself. It is not held over your couch, your record collection or you personally if someone decides to sue you.
Officially, it’s called the master policy. It covers the common areas, shared buildings and structures, plus the HOA’s liability when someone gets hurt in those areas. It doesn’t cover your personal belongings or your personal liability, and in many communities it doesn’t cover the inside of your unit or your house either. Exactly where the umbrella ends depends on your governing documents and the policy itself, which is why the HOA has insurance and you need some too.
Below: what the master policy covers, where “hazard” and fire fit in, the three flavors of condo coverage, how it works for houses and where your own HO-6 or homeowners policy picks up the slack. For more fun (we use the word loosely), visit our HOA insurance section.
What homeowners association insurance covers
The HOA buys the master policy and pays for it from assessments, which means every owner chips in. Congratulations: you are part-owner of an insurance premium. It usually comes in two parts:
- Property coverage for the stuff the HOA owns or must insure: clubhouse, pool, lobby, fitness room (yes, even the treadmill nobody uses), fences, gates and, in a condo, the building structure, roof and shared walls.
- Liability coverage for claims from people who get hurt, or whose property gets damaged, in areas the HOA controls.
What the HOA must insure is spelled out in your governing documents (and, in some states, the condo statute). The CC&Rs usually have an insurance article, and the maintenance article tells you who’s on the hook for each part of the property. If your CC&Rs have been working as a doorstop, our article on how governing documents work is a painless place to start.
HOAs also carry policies that protect the organization and its volunteers, such as directors and officers liability and fidelity coverage, because nobody joins the board hoping to get sued. Those live in the section on other HOA policies below.
Is HOA insurance the same as hazard insurance?
Not exactly, though they’re related. “Hazard insurance” is a phrase that shows up on mortgage paperwork, usually right around the time your signing hand starts to cramp. It means property coverage: the part of a policy that pays to repair or rebuild a building damaged by things like fire, wind or hail. The National Association of Realtors describes it as the section of a homeowners policy that protects the dwelling and structures such as a garage. Floods? Not invited.
Who carries the hazard coverage depends on what kind of home you have:
- Condos. The master policy usually insures the building. Fannie Mae’s Selling Guide requires a master property policy for a condo project’s common elements and residential structures, unless the project’s legal documents make owners insure them instead.
- Detached homes in a planned development. Your own homeowners policy is your hazard coverage. Under the same Fannie Mae guide, individual policies are the default here.
- Townhomes. “It depends,” the two most beloved words in HOA land. The CC&Rs decide. More below.
If your lender asks for proof of hazard insurance on a condo, ask the HOA or its manager for a certificate of the master policy, and ask the lender whether you also need an HO-6.
What condo association insurance covers
In a condo, the big question is how far into your unit the master policy reaches. There are three common approaches. The names get tossed around loosely, so read the actual policy and CC&Rs before you bet your kitchen on it.
Bare walls coverage: the minimalist
Covers the building structure, the common areas and property the HOA owns, and generally stops at your unit’s unfinished surfaces. Everything inside (flooring, cabinets, fixtures, appliances, wall coverings) is yours to insure.
Single entity coverage: the middle child
Covers everything bare walls does, plus the fixtures and finishes inside units as they were originally built. That countertop upgrade someone added later? Usually your policy’s problem.
All-in coverage: the overachiever
Sometimes called all-inclusive. Covers the structure plus the fixtures, improvements and additions inside units. You still need coverage for your belongings, your personal liability and somewhere to stay after a loss. The HOA is not booking your hotel.
Plot twist: the deductible. Whichever approach you have, the master policy has a deductible, and it can be large. Many governing documents let the HOA pass all or part of it to the owner whose unit was involved in the loss, or spread it across all owners. So yes, the HOA’s insurance can still send you a bill.
Coverage in single-family and townhome communities
In a community of detached homes, the HOA’s property policy usually covers only the shared goodies: clubhouse, pool, parks, entry features, perimeter walls and private streets. Its liability coverage handles injuries in those spots. If a guest slips at the community pool, the claim would normally go to the HOA and its insurer.
Your house and lot are all yours, and so is the insurance. Each owner carries a standard homeowners policy. The HOA’s policy won’t rebuild your home after a fire, and it won’t cover a mishap in your driveway.
Townhomes, true to form, keep things interesting. In some communities, owners insure their own buildings just like a detached house. In others, the CC&Rs have the HOA insure the building shells while owners carry a condo-style policy for the inside. The governing documents break the tie.
Does HOA insurance cover fire?
Short answer: fire is one of the basic things property insurance exists for. (Fire is no joke, so we’ll keep this section straight.) The California Department of Insurance lists fire among the perils a homeowners policy typically covers, and Fannie Mae’s master policy requirements include it too. The real question is whether the master policy insures the part of the property that burned.
- Condo: The master policy normally pays to repair fire damage to the building and common areas, after its deductible. Interior items it doesn’t reach, your belongings and your extra living costs fall to your HO-6.
- Single-family community: The master policy covers fire damage to the clubhouse and other HOA property, not your house. Your own homeowners policy covers your home.
How the owner’s HO-6 or homeowners policy fits around it
A condo owner’s policy is called an HO-6 (catchy, we know), sometimes described as “walls-in” coverage. According to the California Department of Insurance residential insurance guide, it covers:
- Damage to your unit’s interior and to improvements you’re responsible for under the governing documents
- Your personal property: the couch, the record collection, the air fryer
- Personal liability and medical payments to others
- Loss of use: extra living costs if you can’t stay in your unit after a covered loss
State law usually doesn’t require an HO-6, but real life often does. Some CC&Rs require one, and lenders commonly do too: under Fannie Mae’s Selling Guide, a borrower must have a unit owner policy when the master policy doesn’t cover the unit’s interior and improvements, or when it has a per-unit deductible.
Before you buy an HO-6 or homeowners policy in an HOA, check:
- Named perils or open perils. Named perils covers only the causes it lists, like fire, theft and vandalism. Open perils covers anything not specifically excluded. Either way, read the exclusions. Yes, the boring part.
- Loss assessment coverage. Pays your share of certain assessments the HOA levies after a loss, like when damage blows past the master policy limit. Whether it also covers an assessment for the master policy deductible depends on your policy, so ask. The Department of Insurance guide also suggests checking how much it provides for earthquake losses.
- Flood and earthquake. Standard policies cover neither. FEMA says most homeowners insurance doesn’t cover flood damage, and earthquake coverage is sold separately. Ask whether your HOA carries either one instead of assuming and hoping.
- Valuables. Standard policies usually limit what they’ll pay for jewelry, art and similar items. If you own the fancy stuff, ask about scheduling it separately.
Who pays when damage crosses the line between unit and common area
Most insurance squabbles happen at the border between your unit and the common area, and the usual troublemaker is water. If a roof leak drips into a top-floor ceiling, the roof is normally the HOA’s to fix, while your policy covers your belongings and any interior items the master policy doesn’t reach. If the water came from an appliance or fixture you’re responsible for, your own policy is usually the first stop, and the HOA may charge its deductible to you if the governing documents allow it.
Which policy pays depends on what was damaged, who’s responsible for that part under the CC&Rs and the terms of each policy. Report the loss to both the HOA and your insurer promptly, then let the adjusters do the sorting. That is, after all, their whole job.
The other policies an HOA carries
The master policy is the headliner, but it isn’t the whole band. Most HOAs carry five kinds of insurance. Owners mostly care about the first two. Board members get to care about all five. Lucky them.
- Property insurance. Fixes or rebuilds what the HOA owns or must insure after a fire, windstorm or other covered loss. This is the master policy we’ve been talking about.
- General liability. Steps in when someone gets hurt in an area the HOA runs, like the classic wet-pool-deck slip, and usually pays for the HOA’s lawyer too. See reducing HOA liability.
- Directors and officers (D&O). For when someone insists the board got it wrong: uneven rule enforcement, a botched election, that sort of thing. It protects the HOA and its volunteers, but not fraud or deliberate wrongdoing. Claims usually have to be reported while the policy is active, so don’t sit on that angry letter.
- Fidelity or crime insurance. Pays the HOA back if someone with access to its money helps themselves. The limit should match the money that could vanish at once, usually reserves plus a few months of dues, and it should cover volunteers and the management company too.
- Workers’ compensation. Required in most states if the HOA has employees. Plenty of HOAs without employees buy it anyway, because a hurt worker of an uninsured contractor may come knocking. More in workers’ comp insurance for homeowners associations.
An umbrella policy stacks extra liability limits on top. Flood and earthquake usually aren’t in standard property policies and have to be bought separately. Earthquake deductibles are often a percentage of the building’s insured value, which is a sentence that should make any treasurer sit up straight, so know how you’d pay one before you decide.
A yearly insurance check for the board
- Start 90 to 120 days before renewal so there’s time to shop around.
- Hand your agent the governing documents and ask, in writing, whether the coverage meets them.
- Update the cost-to-rebuild estimate. Construction prices don’t stand still.
- Compare the fidelity limit to what’s actually in the bank.
- Collect certificates of insurance, including workers’ comp, from vendors before anyone picks up a tool.
Premium went up and you need a moment? Then read rising HOA insurance costs in California and the FAIR Plan.
In California
In California, the CC&Rs are the first stop for what the HOA must insure. The Davis-Stirling Act, California’s HOA rulebook, adds a few rules that make it easier to see where the master policy stops:
- Annual insurance summary. The annual budget report must summarize the HOA’s property, general liability, earthquake, flood and fidelity policies, with the insurer, limits and deductibles. It must also warn owners that the HOA’s policies may not cover their property and that they might owe all or part of a deductible. It is worth reading, fine print and all. (Civil Code 5300)
- Notice of changes. If a listed policy lapses or is canceled without replacement, or changes significantly, say a lower limit or a higher deductible, the HOA must notify every member as soon as reasonably practicable. No surprise plot twists. (Civil Code 5810)
- Maintenance defaults. Unless the declaration says otherwise, the HOA repairs and maintains the common area and each owner handles their own separate interest. (Civil Code 4775) For exclusive use common area like a balcony or patio, the default is that you maintain it and the HOA repairs and replaces it. Insurance responsibility usually follows the same line.
- Owner liability shield. A lawsuit that arises only because an owner shares ownership of the common area must be brought against the HOA, not individual owners, if the HOA carries general liability insurance of at least $2 million, or $3 million for a development with more than 100 separate interests. (Civil Code 5805)
- Theft coverage. Unless the CC&Rs ask for more, the HOA must carry crime, employee dishonesty or fidelity coverage for its directors, officers and employees worth at least its reserves plus three months of assessments, including computer fraud and funds transfer fraud, and covering the management company and its employees if there is one. (Civil Code 5806)
- A shield for volunteers. A volunteer director or officer who meets the law’s conditions isn’t personally on the hook beyond the HOA’s insurance for certain negligence claims, as long as the HOA carries general liability and D&O coverage of at least $500,000 (100 or fewer units or lots) or $1 million (more than 100). (Civil Code 5800)
Our guide to the Davis-Stirling Act explains the annual budget report and the other disclosures boards must send.
For the full set of California requirements, see our guide to California HOA insurance requirements.
Do homeowners associations need insurance?
In practice, yes. Going without is a bit like skipping the smoke detector because nothing has burned yet. Several things push an HOA to carry it:
- The CC&Rs. The insurance article tells the HOA what it must insure and at what level.
- Lenders. Fannie Mae’s guidelines require a master property policy for condo projects, so buyers in an uninsured condo community may have trouble getting loans that follow those guidelines.
- California law. Civil Code 5805, above, protects individual owners from certain common-area injury claims only when the HOA carries the required general liability coverage.
A board that lets coverage lapse leaves the HOA paying for a loss out of reserves or a special assessment, and nobody enjoys that meeting. Insurance is one of the core duties covered in an HOA board member’s responsibilities.
Before you buy or renew a policy
- Get the HOA’s current insurance summary or certificate and jot down the property limit and the deductible.
- Read the insurance and maintenance sections of the CC&Rs to find where the HOA’s responsibility ends. Snacks recommended.
- Hand both to your insurance agent and ask for a policy that picks up exactly where the HOA’s leaves off. Ask how much loss assessment coverage makes sense given the master policy deductible.
Still on the fence about needing your own policy? See do you need homeowners insurance if you live in an HOA?
Scope. “HOA insurance” refers to coverage an association procures for (1) property it owns or is obligated by its governing documents to insure and (2) its own legal liability. It is ordinarily written as a master policy.
Typical covered interests: common area, shared buildings and structures, and third-party liability for injuries arising in areas under association control. Typically outside the association’s coverage: owners’ personal property, owners’ personal liability and, in many communities, unit interiors or detached dwellings.
The allocation of insurance responsibility between association and owner is governed by (a) the governing documents, principally the CC&Rs, and (b) the policy terms. Because neither party’s coverage is complete on its own, both carry insurance. This article addresses master policy scope; the relationship among master, hazard and fire coverage; the three common condominium coverage approaches; single-family and townhome structures; and the owner’s HO-6 or homeowners policy. See also our HOA insurance section.
What homeowners association insurance covers
Purchase and funding. The association procures the master policy and pays the premium from assessments; each owner therefore bears a share of the cost.
Components.
- Property coverage (first-party): assets the association owns or must insure, e.g., clubhouse, pool, lobby, fitness room, fences, gates and, in a condominium, the building structure, roof and shared walls.
- Liability coverage (third-party): claims by persons who are injured, or whose property is damaged, in areas the association controls.
Source of the obligation. The governing documents and, in some states, the condominium statute define what the association must insure. In the CC&Rs, the insurance article states the coverage obligation and the maintenance article allocates responsibility by component. See how governing documents work.
Other association coverages. Directors and officers (D&O) liability and fidelity coverage protect the organization and its volunteers. See the section on other HOA policies below.
Is HOA insurance the same as hazard insurance?
Definition. “Hazard insurance” is a mortgage-industry term for property coverage: the portion of a policy that pays to repair or rebuild a structure damaged by causes of loss such as fire, wind or hail. The National Association of Realtors describes it as the section of a homeowners policy protecting the dwelling and structures such as a garage. Flood is not within its scope.
Allocation by property type.
- Condominium: Hazard coverage for the building ordinarily sits in the master policy. Fannie Mae’s Selling Guide requires a master property policy covering the project’s common elements and residential structures, unless the project’s legal documents require unit owners to insure them.
- Planned development, detached: The owner’s individual homeowners policy is the hazard coverage for the dwelling; Fannie Mae’s Selling Guide treats individual policies as the default for these communities.
- Townhome: Determined by the CC&Rs (see the single-family and townhome section below).
Lender verification. For a condominium, obtain a certificate of the master policy from the association or its manager, and confirm with the lender whether an HO-6 is also required.
What condo association insurance covers
Threshold issue: the extent to which the master policy reaches into the unit. Three approaches are commonly described. Nomenclature is not standardized; the controlling text is the policy and the CC&Rs.
Bare walls coverage
Narrowest form. Covers the building structure, common areas and association-owned property; coverage generally terminates at the unit’s unfinished surfaces. The owner insures flooring, cabinetry, fixtures, appliances and wall coverings.
Single entity coverage
Intermediate form. Bare walls scope plus interior fixtures and finishes as originally constructed. Improvements and betterments subsequently added by an owner are generally insured under the owner’s policy.
All-in coverage
Broadest form, also called all-inclusive. Structure plus interior fixtures, improvements and additions. The owner retains responsibility for personal property, personal liability and loss of use (additional living expense).
Deductible. Each form carries a master policy deductible, which may be substantial. Governing documents frequently authorize the association to allocate all or part of the deductible to the owner of the unit involved in the loss, or to spread it across all owners.
Coverage in single-family and townhome communities
Detached communities. The association’s property coverage is typically limited to shared amenities and structures: clubhouse, pool, parks, entry features, perimeter walls and private streets. Its liability coverage responds to injuries in those areas; a guest injured at the community pool would ordinarily claim against the association and its insurer.
The owner insures the dwelling and lot under a standard homeowners policy. The master policy does not respond to fire loss to the dwelling or to an injury in an owner’s driveway.
Townhome communities. Two structures are common: (1) owners insure their buildings as with a detached dwelling; or (2) the CC&Rs obligate the association to insure the building shells, with owners carrying condominium-style interior coverage. The governing documents control.
Does HOA insurance cover fire?
Fire is one of the basic perils property insurance is written to cover. The California Department of Insurance lists fire among the perils a homeowners policy typically covers, and Fannie Mae’s master policy requirements include it. The coverage question is therefore not whether fire is a covered peril but whether the damaged property falls within the master policy’s scope.
- Condominium: The master policy ordinarily funds repair of fire damage to the building and common area, subject to the deductible. Interior items outside master policy scope, personal property and additional living expense fall to the HO-6.
- Single-family: The master policy covers fire damage to the clubhouse and other association property only; the dwelling is insured under the owner’s homeowners policy.
How the owner’s HO-6 or homeowners policy fits around it
Form. The condominium unit owner’s policy is the HO-6 (“walls-in” coverage). Per the California Department of Insurance residential insurance guide, it covers:
- Damage to the unit interior and to improvements that are the owner’s responsibility under the governing documents
- Personal property
- Personal liability and medical payments to others
- Loss of use: additional living expense when the unit cannot be occupied following a covered loss
Requirement. An HO-6 is not usually mandated by statute but is frequently required by the CC&Rs, by lenders or both. Under Fannie Mae’s Selling Guide, the borrower must carry a unit owner policy where the master policy does not cover unit interiors and improvements, or where it carries a per-unit deductible.
Policy review points (HO-6 or homeowners policy in an HOA):
- Named vs. open perils. Named perils: covers only the enumerated causes of loss, e.g., fire, theft, vandalism. Open perils: covers any cause not specifically excluded. Review the exclusions under either form.
- Loss assessment. Covers the insured’s share of certain post-loss association assessments, e.g., where damage exceeds the master policy limit. Application to an assessment for the master policy deductible is policy-specific; confirm with the insurer. The Department of Insurance guide also suggests checking the amount it provides for earthquake losses.
- Flood and earthquake. Not covered by standard policies. FEMA states that most homeowners insurance does not cover flood damage; earthquake coverage is likewise sold separately. Confirm whether the association carries either.
- Scheduled property. Standard policies limit recovery for jewelry, art and similar items; consider scheduling them separately.
Who pays when damage crosses the line between unit and common area
Disputes arise most often where a loss spans the boundary between the separate interest and the common area; water intrusion is the typical case.
- Roof leak into a top-floor unit: The roof is ordinarily the association’s repair obligation; the owner’s policy responds to personal property and interior items outside master policy scope.
- Water from an owner-responsibility appliance or fixture: The owner’s policy is usually the first to respond, and the association may charge its deductible to that owner if the governing documents so provide.
Allocation depends on (1) the damaged component, (2) responsibility for that component under the CC&Rs and (3) the terms of each policy. Give prompt notice of loss to both the association and the owner’s insurer; the adjusters determine the split.
The other policies an HOA carries
Scope. The master property policy is one element of an association’s insurance program. Five coverages are typical; owners’ interests are principally implicated by (1) and (2), while the board is responsible for the program as a whole.
- Property (first-party): repair or replacement of property the association owns or is obligated to insure, following a covered cause of loss (e.g., fire, wind). Corresponds to the master policy scope discussed above.
- Commercial general liability (third-party): bodily injury and property damage arising from the association’s premises or operations; ordinarily includes defense. See reducing HOA liability.
- Directors and officers (D&O): claims alleging wrongful acts in the governance of the association (e.g., inconsistent enforcement, election irregularities, breach of fiduciary duty). Insureds typically include the entity and its volunteers; fraud and intentional misconduct are generally excluded; usually written on a claims-made basis, requiring notice during the policy period.
- Fidelity / crime: first-party coverage for theft of association funds. Limits should at least equal maximum funds exposure, typically reserves plus several months of assessments, and should extend to volunteers and any managing agent.
- Workers’ compensation: statutorily required in most states where the association has employees; frequently carried absent employees because an injured worker of an uninsured contractor may assert a claim against the association. See workers’ comp insurance for homeowners associations.
Excess and specialty lines. Umbrella or excess liability provides limits above scheduled underlying policies. Flood and earthquake are generally excluded from standard property forms and written separately; earthquake deductibles are commonly expressed as a percentage of insured value, so funding of the deductible should be addressed before the coverage decision.
Annual insurance review for the board
- Commence 90 to 120 days before renewal.
- Furnish the governing documents to the agent; obtain written confirmation of compliance.
- Update replacement cost valuations for insured buildings and improvements.
- Reconcile the fidelity limit against current reserve and operating balances.
- Obtain vendor certificates of insurance, including workers’ compensation, before work begins.
On premium increases and residual-market options, see rising HOA insurance costs in California and the FAIR Plan.
In California
Primary source. The CC&Rs establish the association’s insurance obligations. The Davis-Stirling Common Interest Development Act supplements them:
- Civil Code 5300 (annual insurance summary). The annual budget report must summarize the association’s property, general liability, earthquake, flood and fidelity policies, including insurer, limits and deductibles, and must notify owners that the association’s policies may not cover their property and that they may be responsible for all or part of a deductible.
- Civil Code 5810 (notice of changes). If a listed policy lapses or is canceled without replacement, or changes significantly (e.g., a reduced limit or increased deductible), the association must notify all members as soon as reasonably practicable.
- Civil Code 4775 (maintenance defaults). Unless the declaration provides otherwise, the association repairs and maintains the common area and each owner maintains the separate interest. For exclusive use common area (e.g., balcony, patio), the default allocation is owner maintenance with association repair and replacement. Insurance responsibility usually tracks this allocation.
- Civil Code 5805 (owner liability). A tort action arising solely from an owner’s shared ownership interest in the common area must be brought against the association, not individual owners, if the association carries general liability insurance of at least $2 million, or $3 million where the development has more than 100 separate interests.
- Civil Code 5806 (fidelity coverage). Unless the governing documents require greater amounts, the association shall maintain crime insurance, employee dishonesty coverage, fidelity bond coverage or the equivalent for its directors, officers and employees in an amount at least equal to reserves plus three months of total assessments, including equal protection against computer fraud and funds transfer fraud; where a managing agent or management company is used, coverage must extend to dishonest acts of that agent or company and its employees.
- Civil Code 5800 (volunteer director and officer liability). A qualifying volunteer director or officer is not personally liable in excess of the association’s coverage for specified negligent acts or omissions, provided the association maintains general liability and D&O coverage of at least $500,000 (100 or fewer separate interests) or $1,000,000 (more than 100 separate interests).
See our guide to the Davis-Stirling Act for the annual budget report and related disclosures.
For the full set of California requirements, see our guide to California HOA insurance requirements.
Do homeowners associations need insurance?
As a practical matter, yes. The drivers:
- Contractual: The insurance article of the CC&Rs specifies required coverage and levels.
- Financing: Fannie Mae requires a master property policy for condominium projects; buyers in an uninsured condo community may have difficulty obtaining loans that follow those guidelines.
- Statutory (California): The owner protection in Civil Code 5805 is conditioned on the association carrying the required general liability coverage.
Consequence of a lapse: uninsured losses are funded from reserves or a special assessment. Insurance oversight is a core board duty; see HOA board member responsibilities.
Before you buy or renew a policy
- Obtain the association’s current insurance summary or certificate of insurance; record the property limit and the deductible.
- Review the insurance and maintenance articles of the CC&Rs to identify where the association’s responsibility ends.
- Provide both to your agent; request coverage that picks up at that boundary, and size loss assessment coverage relative to the master policy deductible.
Related: do you need homeowners insurance if you live in an HOA?
This article is general educational information, not legal or insurance advice. Laws vary by state and your association’s governing documents control many of these questions, so check with your association’s attorney or another qualified professional about your situation.