Condo Insurance: What Does Your HOA Cover, and What Is On You?

Does my HOA's insurance cover my condo?

Partly. In nearly every condo building, the association carries a master policy on the building and the shared areas: the roof, the hallways, the lobby, the elevators, the structure itself. You carry an HO-6 for your unit, your belongings, and your liability.

What sits between the two is decided by your association's governing documents, usually the declaration or the covenants, conditions, and restrictions (often called the CC&Rs), together with the master policy itself. Your HO-6 does not decide it. That is why two neighbors in the same building can be insured very differently without either one knowing. Your own declarations page shows your limits, but not where the line is.

What kind of master policy does my building have?

There are three kinds, and the difference decides how much building coverage your own HO-6 needs to carry.

1. Bare walls: the master policy covers the structure only. Everything inside your unit, from the flooring and cabinets to the fixtures and appliances, is yours to insure.
2. Single entity: the master policy covers the original fixtures that came with the unit, but not upgrades you or a previous owner made. A renovated kitchen is yours.
3. All-in: the most complete kind. The master policy covers both the original fixtures and later upgrades inside the unit.

Which one your building has is the single most useful thing a condo owner can find out. The answer is in the association's documents, and the manager or board can point to it.

Can the association make me pay its deductible?

It can, and this is the first surprise. Master policies often carry large deductibles, sometimes $10,000, $25,000, or more. When damage affects only one unit and the cost falls below that deductible, the association may pass the whole cost to that unit's owner.

Your HO-6 may have a coverage called loss assessment that helps with exactly this, but only up to the limit printed on your policy. Whether that limit is anywhere near your building's master deductible is a question worth asking before a pipe bursts, not after. (If you want to see how a leak travels from one unit to the one below, the What-If House bathroom shows it in about a minute.)

What is a loss assessment, and how big can it get?

This is the second surprise. When a covered loss hits a shared area, such as the roof or the lobby, and the master policy does not cover the full cost, the association can divide the shortfall among the owners. That is a loss assessment, and it arrives as a bill.

Is a townhouse insured like a condo?

Usually not. A townhouse is usually insured the way a single-family home is: your own policy covers the full structure, roof to outside walls. That surprises owners whose association mows, paints, and even repairs the roof.

Two details worth pinning down:

• How the shared party walls between units are handled after damage.
• Whether the association carries its own policy with a deductible that can be divided among owners.

Maintaining something and insuring it are set by different documents. An association can maintain your exterior without insuring any of it, and community-association insurance specialists describe confusing the two as the single most common insurance mistake townhouse owners make. The CC&Rs decide who insures what, not the maintenance schedule.

Five things to find out this week

1. Which kind of master policy your association has: bare walls, single entity, or all-in.
2. The master policy deductible.
3. Whether that deductible can be passed to one owner.
4. The loss assessment limit on your HO-6 declarations page.
5. For townhouses, what the CC&Rs say about who insures the structure and the party walls.

What does this mean for you?

Here is the part nobody says out loud at closing. A condo owner's real exposure is not the unit, it is the building: the master policy's type, its deductible, and how the association divides shortfalls. All three live in documents most owners have never opened. Your HO-6 quietly assumes you know them.

CoverageDecoder asks whether you own a condo or a townhouse and, when the association insures the building, asks what kind of master policy it carries, what its deductible is, and what your loss assessment limit is. The report explains the topics your answers point to and hands you the questions worth asking, in words you don't need a law degree to understand.