Knowing what to expect from your HOA master insurance policy and what you need to insure on your own is important to sort out before you purchase your condo. It’s also critical to know if your HOA carries enough insurance coverage to handle a catastrophe in your unit or a unit next door. Being underinsured can spell trouble, especially if your individual insurance has any gaps with the master insurance.
Let’s face it, most people don’t put too much thought into insurance until the unthinkable happens. Whether it is a fire, tree damage, smoke damage, or an accident, not having insurance or being underinsured can create a huge headache, not to mention a financial disaster of its own making.
Know the Difference Between HOA Insurance Coverage
Homeowner insurance for townhouses, condos, or duplexes that are part of an HOA’s master insurance usually covers all public, common areas of a development. This includes amenities, elevators, and exterior features such as the roof and siding. Individual homeowners need to insure only their own units, including their own personal items and appliances. In addition to insuring “things,” these two parts of any HOA insurance should also cover liabilities for injuries.
From an insurance point of view, it is worth learning where the HOA insurance stops and your individual unit’s insurance should begin, so as to make sure no gaps exist that could leave you without coverage after damage occurs. You should know what each type of insurance covers. Some homeowners find it helpful to use the same insurance carrier or have both carriers connect to ensure no gaps exist.
What is a Master Policy?
Living in an apartment complex, condominium unit, or townhouse may mean you are part of an association, otherwise known as a homeowners association or HOA. Many HOAs carry what’s known as a “master policy.” Generally, the Master Policy has “walls-out” coverage for all units in the building.
What is Covered Under a Master Policy?
This type of policy typically provides coverage for both physical damage and personal injuries. Items that are usually covered in an insurance policy of this kind may include damage to the parts of the property shared by all owners, such as roofs, common walls, lobbies or atriums, stairways, elevators, basements, fitness centers and pools, ponds or lakes, playgrounds, and clubhouses. The damage could be caused by Mother Nature, vandals, theft, or even homeowners who have experienced an accident.
Personal injuries that occur in the common areas and amenity areas are also usually covered under the master policy. For example, if someone slips and falls in the pool area or is injured in an elevator, those injuries would most likely be covered under the HOA master policy.
The governing documents of your specific HOA should state exactly which areas the HOA master policy insures.
Most HOA Master Policies “Walls-Out” cover…
- Roofs, foundation, and exterior siding
- Shared framing, studs, and structural concrete
- Common areas (hallways, elevators, lobbies, pools, stairwells)
- Exterior liability (slips and falls on shared walkways/driveways or common areas)
Most HOA Master Policies “Walls-In” do not cover…
- Drywall, paint, wallpaper, and insulation
- Flooring (carpet, tile, hardwood)
- Cabinets, countertops, and light fixtures
- Kitchen appliances, sinks, and toilets
- Personal belongings (furniture, clothes, electronics)
- Personal liability inside your unit
Know the Insurance Limits in Massachusetts
Unit owners should also understand that HOA insurance has limits. Your condo association’s master policy will cover property damage to the building and common areas, but only up to its limits. Depending on what those financial limits are, there’s always a chance that a severe incident could exceed them. If that happens, it might fall on the condo owners to make up the difference and help repair the damage.
In Massachusetts, state law (M.G.L. c. 183A) does not set a fixed dollar limit for HOA master insurance policies. Instead, the law requires the association to maintain property coverage for 100% of the full replacement cost of all common structures, and secondary mortgage lenders require at least an 80% to 100% coinsurance clause. For general liability, standard HOA policies carry $1 million per occurrence and $2 million aggregate to cover accidents on shared property, though larger communities typically layer a $5 million to $10 million umbrella policy on top to protect against major claims.
Know the Liability Requirements of Your HOA
Most HOAs require individual unit holders to carry liability insurance in case a visitor gets injured in a unit. The master insurance should cover common-area accidents, but your unit also needs coverage. Talk to your insurance agent about what’s reasonable and whether your HOA has any requirements for the level of coverage.
When it comes to insurance, it is essential to know the types, limits, and requirements for your individual insurance and what the master insurance policy covers. To ensure proper insurance coverage, a unit owner should request the Certificate of Insurance (COI), Master Policy Declarations Page, full Master Policy (including endorsements and exclusions), Master Policy Deductible Schedule, Deductible Allocation Policy, Master Deed (or Declaration of Condominium), HOA Bylaws (insurance section), and any applicable certificates for Flood, Earthquake, Fidelity/Crime, and Directors & Officers (D&O) coverage.
Understanding the nuances of HOA master insurance policies is essential for protecting your property and financial well-being. Navigating coverage limits, liabilities, and potential gaps requires a deep understanding of association documents and state requirements. If you have questions about your specific policy or need guidance on ensuring comprehensive coverage, contact Thayer & Associates. Our team brings extensive experience and expertise in HOA insurance management to help you secure the peace of mind you deserve.