HOA Insurance: How It Works and What It Covers

HOA insurance covers common areas owned by a homeowners association, but it doesn’t offer much protection to the owners’ residences.

Daria Kelly Uhlig
Daria Kelly Uhlig
  • Licensed Realtor with 10+ years in personal finance content

  • Contributor to Nasdaq and USA Today

Daria is a licensed Realtor and resort property manager specializing in personal finance, real estate, and insurance topics. In her spare time, she practices photography.

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Sarah Archambault
Sarah Archambault
  • Experienced personal finance writer

  • Background working with banks and insurance companies

Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.

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Updated July 23, 2024

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Homeowners association (HOA) insurance protects homeowners and condo owners by providing “master” coverage of their associations’ common areas. Those areas include buildings, amenities, and the communities’ grounds — things your association dues go toward maintaining and repairing. In most cases, the policies include liability coverage as well.

But while the HOA’s master policy protects your interest in common areas, it might not cover your home or belongings, so it’s important to understand exactly what HOA insurance is and how it works. That way, you can decide for yourself whether you need to compare home insurance quotes and find additional coverage.

Quick Facts
  • HOA insurance laws vary by state.

  • HOA insurance reduces your risk of paying out of pocket for damage to common areas from unexpected emergencies.

  • Condo associations can choose from several types of HOA insurance policies.

How HOA insurance works

HOA insurance protects all the property — including buildings, grounds, and amenities — that the association is responsible for maintaining and repairing.[1] These master policies also provide liability coverage that protects the association if someone hurts themselves in a common area, such as a pool or playground.

Your association’s master policy benefits you and other association members. As an owner, you’re responsible for a proportionate share of common-area maintenance and repair costs, which you pay through your association dues.

Without insurance, members would have to cover the full cost of catastrophic damage from fire, natural disasters, or other covered emergencies.

The HOA purchases the policy on behalf of the association, and it pays the premiums from members’ HOA fees. The specific type of coverage it purchases depends on the type of community and the requirements detailed in the community’s governing documents.

Good to Know

In the case of a condo building, the master policy can take one of three forms: bare walls coverage, walls-in coverage, or all-in coverage. Each type covers different aspects of the building.[2] Planned communities, on the other hand, usually have HOA insurance that covers the common areas but provides no coverage for individual homes.

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Types of condo association master policies

Condo associations have special HOA insurance considerations because of the overlap between common areas and individual owners’ units. Which of the three types of master condo policies your association has affects how much, if any, of your unit you have coverage for.

Bare walls coverage

“Bare walls” refers to the interior of a condo building, including the wall structures but not the coverings on perimeter walls facing inside your unit. Of the three types of condo master policies, bare walls policies provide the least amount of coverage for individual units. 

If your condo association has bare walls coverage, the policy covers the building’s structure and systems, as well as any personal property that belongs to the association.[3] It also covers the walls that form the perimeter of your unit, but only as far in as the sheetrock. Paint and other wall coverings, and fixtures like cabinets and moldings, are excluded from coverage.

Walls-in coverage

Walls-in coverage protects the building plus the units’ original structures and fixtures, such as wall coverings, cabinets, and flooring, as well as the wiring and plumbing in your unit

While a step up from bare walls coverage, walls-in policies exclude liability and personal property coverage for your unit, and they typically exclude any upgrades or improvements owners have made.

All-in coverage

All-in coverage offers unit owners the most protection. It takes walls-in coverage a step further by covering improvements and customizations you’ve made. For example, if you upgraded kitchen counters and replaced carpeting with hardwood flooring, your association’s all-in policy would include those improvements in its valuation for claims purposes.

Learn More: What Is Other Structures Coverage in Home Insurance?

Learn More: What Is Other Structures Coverage in Home Insurance?

What an HOA master policy covers

An HOA master policy is vital to the financial health of the association. And because property owners make up the association, it’s also vital to protecting owners’ investments in their homes.

An HOA master policy covers common areas — which include everything from buildings to clubhouses and other buildings, to swimming pools, playgrounds, and gardens and walking trails. If the association is responsible for maintaining and repairing it, it’s a common area.

For example: Say a covered peril such as fire did $200,000 more in damage than the association had in reserves. The property damage coverage included in the HOA master insurance policy would cover some or all of it. Without the coverage, homeowners would be responsible for paying their share of the costs out of pocket.

The same would hold true if a visitor were to suffer a serious injury in a pool or on a playground and sue the association for damages. Even if the master policy’s general liability insurance didn’t cover 100% of the cost, it would at least reduce the owners’ out-of-pocket expenses. 

What an HOA master policy doesn’t cover

Just like with homeowners insurance, HOA master insurance has certain exclusions, such as damage from:

  • Flooding

  • Earthquakes

  • Water backup

  • Deferred maintenance

  • Acts of war

Is an HOA master policy enough coverage?

An HOA master policy isn’t meant as a substitute for homeowners insurance, so the coverage doesn’t provide adequate protection for your home and your assets. Even if you have all-in coverage for your condo, for example, the policy doesn’t provide you with liability coverage for injuries that occur in your unit, nor does it protect your personal belongings.

To protect your home and belongings, consider adding condo insurance, also known as HO-6 insurance. An HO-6 policy covers your dwelling and personal property. Plus, it offers personal liability protection and loss of use coverage.

Where the HOA itself is concerned, the association might need to add supplemental coverage to its standard policy. That coverage might include:

  • Workers compensation: Workers compensation protects the association against lawsuits arising from association employees’ injuries suffered while at work.

  • Discrimination coverage: Discrimination coverage protects the association in the event of a discrimination lawsuit.

  • Fidelity coverage: Fidelity coverage protects the association against illegal activities conducted by an association employee, officer, or board member.

  • Directors and officers coverage: This coverage protects the association in the event of a lawsuit against association officers and board members for activities connected to their association roles.

Consider loss assessment coverage

One way to reduce the risk of having out-of-pocket expenses arising from an HOA master policy claim is to purchase your own loss assessment insurance.

Loss assessment insurance covers some or all of your out-of-pocket costs arising from an HOA master policy claim. These costs might include your share of the master policy deductible, or the difference between the master policy coverage limits and the actual cost of the damage, that the association charges you as a special assessment.

It’s important to note that standard homeowners insurance, including condo insurance, doesn’t cover loss assessments.

HOA vs. homeowners insurance

The primary difference between HOA insurance coverage and homeowners insurance coverage is that HOA insurance provides property damage and personal liability coverage for association common areas, while homeowners insurance covers property damage and liability coverage for HOA members’ individual homes, including their owned land.

The association buys the HOA policy. Although members pay for it through their association dues, they have no direct involvement in selecting and purchasing the policy. But members can view the policy.

The following table compares the two at a glance.

 HOA InsuranceHomeowners Insurance
Areas coveredCommon areasIndividual home along with owned land it sits on
Type of coverageProperty damage, liabilityDwelling, personal property, liability, loss of use
Who purchases?AssociationHomeowners
Who pays?Homeowners, through association duesHomeowners

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HOA vs. condo insurance

HOA insurance protects the association with property damage and liability coverage for the condo building as well as the condominium’s common areas. In some cases, it provides limited physical damage coverage for the condo units as well.

Condo insurance, or HO-6 insurance, is for condo owners. It provides property damage and liability coverage for damage that occurs inside the walls of the owners’ units. 

The following table compares the two at a glance.

 HOA InsuranceCondo Insurance
Areas coveredBuilding and other common areas; may provide some coverage for perimeter walls of individual unitsUnit interior
Type of coverageProperty damage, liabilityDwelling, personal property, liability, loss of use
Who purchases?AssociationCondo owner
Who pays?Condo owners, through association duesCondo owner

HOA insurance FAQs

Understanding HOA insurance is key to accurately evaluating the types and amounts of homeowners or condo insurance coverage you need for your home. Here’s some additional information about HOA insurance.

  • What are the advantages of being in an HOA?

    Homeowners associations protect property values by ensuring that properties are well maintained and aesthetically consistent. HOAs may also provide security and safety services, as well as amenities such as pools, sports facilities, and parks.

  • Why does an HOA need directors and officers (D&O) insurance?

    Directors and officers (D&O) liability insurance protects the association against lawsuits stemming from the actions of board directors and association officers in connection with their roles in the association.

    For example, a member who disagrees with a board decision might sue. The insurance might cover their costs and the cost of a judgment or settlement.

  • What happens if an HOA has its insurance canceled?

    If an insurer cancels the HOA’s policy, the HOA has to obtain insurance elsewhere or forgo coverage, which would put members at financial risk. State law and the association’s governing documents determine whether the HOA must carry insurance.

  • Can an HOA require homeowners insurance?

    Possibly. Whether yours does depends on its bylaws and declarations. Check with the HOA for more information — especially before buying a condo or house in a community governed by an HOA.

Sources

  1. Insurance Information Institute. "Insuring a co-op or condo."
  2. Justia.com. "Homeowners' Association and Condominium Insurance."
  3. International Risk Management Institute. "Bare Walls Coverage."
Daria Kelly Uhlig
Daria Kelly Uhlig

Daria Uhlig is a freelance writer and editor with over a decade of experience creating personal finance content. Her work appears on USA Today, Nasdaq, MSN, Yahoo Finance, Fox Business, GOBankingRates and AOL. As a licensed Realtor and resort property manager, she specializes in real estate topics, including landlord, homeowners and renters insurance. In her spare time, Daria can be found photographing people and places on Maryland's Eastern Shore. Connect with her on LinkedIn.

Sarah Archambault
Sarah Archambault
  • Experienced personal finance writer

  • Background working with banks and insurance companies

Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.

Featured in

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