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 information to handle a catastrophe in your unit or a unit next door. Being underinsured can spell trouble, especially if your individual insurance has any missing gaps with the master insurance.
Homeowner insurances for town homes, condos, or duplexes that are part of the master insurance of an HOA usually cover all the public, common areas of a development. This includes areas where there are amenities, elevators, and all outside features such as the roof and exterior 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.
Let’s face it, most people don’t put too much thought into insurance until the unthinkable happens. Whether it is a fire, flood, 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
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 the different items are that are covered by each type of insurance. Some homeowners find it helpful to use the same insurance carrier or have both carriers connect to be sure that gaps do not exist.
What is a Master Policy?
Living in an apartment complex, condominium unit, or townhouse potentially means that 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. The governing documents of your specific HOA should state exactly which areas the HOA master policy insures.
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 be most likely covered under the HOA master policy.
Know the Limits
It is also recommended that unit owners understand that there are limits to the HOA insurance. 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.
Know the Liability Requirements
Most HOAs require that individual unit holders have some liability insurance in case a visitor gets injured in a unit. The master insurance should have liability insurance to cover common area accidents but your unit also needs to be covered. Talk to your insurance agent about how much is reasonable and if your HOA has any requirements of level of coverage.
When it comes to insurance, it is essential to know the types, limits, and requirements for your individual insurance and what is covered in the master insurance policy. If you have questions, request a copy of your HOA insurance policy and discuss what gaps need to be filled with your individual agent.