Your Guide to HOA Insurance in 2022
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An HOA, or homeowners’ association, is an organization or community consisting of townhouses, condos, high-rises or homes that maintain regulations and rules that community members must adhere to; failure to do so can result in fines and other penalties.
When you live in a community that has an HOA, you will likely come across HOA coverage or insurance that protects you against certain liabilities and risks. This coverage is also called a master policy. HOA insurance offers protection for both the homeowners association and members of an HOA. Here is a closer look at the subject.
What Is an HOA?
An HOA is a self-governing assembly in residential communities where homeowners jointly pay fees to maintain the neighborhood or common areas. They are commonly run by resident homeowners who volunteer their time as board members that oversee the management of the HOA. Each HOA has its own set of bylaws and rules that the association enforces.
Many benefits come with an HOA, such as standards that all neighbors must adhere to and access to communal amenities, like a gym or pool, if available. However, HOAs do have fees. Homeowners within the community must pay HOA fees that are used to maintain common areas like parks, swimming pools, parking lots, roads and communal landscaping. Purchasing a property in an HOA means you automatically must pay membership fees on a monthly or yearly basis.
HOA members can vote for the board of directors who supervise the daily operations of the HOA, including enforcing regulations, collecting dues, and sharing amenities. You can also volunteer to help the board plan community events or become a board member yourself.
Accidents can happen unexpectedly, no matter what you might do to maintain safety. Slips and falls around the pool area are a common occurrence, children can fall while climbing or playing in a common area or a guest can injure themselves in the lobby. Additionally, physical damage can occur to shared spaces and public areas. Unforeseen circumstances like fire or storms can easily cause extensive damage.
HOA insurance provides coverage in case of repairs or liability expenses. HOAs need insurance coverage to protect their members and the association. Without HOA insurance, the management would have to pay out-of-pocket for legal fees or repair costs. While HOA insurance does not typically cover damage caused by earthquakes and floods, the HOA board can opt for separate coverage for these circumstances.
How Does HOA Insurance Work?
HOA insurance is a type of commercial property insurance that requires members to contribute an equal amount toward the insurance policy to protect amenities and common areas. If one of these common areas, — like the parking garage, stairwell, elevator, community park, tennis courts, pool, gym, lobby or building — is damaged due to a covered event like a storm or fire, the HOA insurance will cover the cost of repairs or replacement. All HOA members must contribute to the HOA, even if they don’t utilize the shared amenities.
HOA insurance works the same way any insurance policy would by protecting against liability and property damage claims. If the HOA gets sued or shared property gets damaged, the insurer will review the claim and determine what they will cover.
How Much Does HOA Insurance Cost?
HOA insurance varies between $100 - $500 monthly, and the average monthly cost is $331. Rates are influenced by your location, the amount of your deductible, and how much coverage is needed.
The cost of HOA insurance also depends on how the policy is tailored to the association’s needs. The two common primary elements of HOA insurance include property damage coverage and liability coverage. In some cases, additional coverages are applied, such as garage keeper insurance or social host liability insurance.
Why Should You Get HOA Insurance?
You may be required to pay towards HOA insurance in certain communities.The two primary aspects of HOA insurance are liability coverage and coverage for property damage. Since the HOA master policy doesn’t cover everything, the HOA board can buy extra coverage like protection from hurricanes, earthquakes and floods. The board could also opt to include an umbrella policy for additional protection.
HOA insurance does not protect the property or home of individual homeowners. They must purchase homeowner’s insurance to protect their property and possessions. HOA insurance protects the community if someone decides to sue the HOA or its board members. It also protects its members from paying special assessments to cover the cost of legal expenses or damages to approved areas. Some HOA insurance offers limited coverage for specific damage to shared roofs and shared walls. If your condo gets a roof leak that results in water damage, your HOA may cover repair costs. However, all HOA master policies vary according to their bylaws, so it’s important to review their policy thoroughly before purchasing your house or condo. This should give you an idea of what the HOA insurance will cover and what it will not, so you can determine what insurance you should purchase for yourself.
What’s the Difference Between HOA and Condo Insurance?
Your HOA insurance offers protection for your condo’s structure, but it won’t cover your clothing, furniture, electronics, jewelry and other personal property. HOA insurance has three types of coverage that protect the building:
- Bare Walls In: This offers limited coverage for the exterior structure and common areas of the building.
- Walls In: This covers common areas of the building along with the exterior walls of individual units. It can cover cabinets, top flooring, countertops and cabinets as long as they have not been changed or altered. This is the most common type of HOA policy.
- All In: This policy is the most comprehensive — providing protection that includes appliances, ventilation, alterations and security equipment.
The HOA’s governing documents typically include which areas the policy will insure.
Condo insurance, on the other hand, helps replace stolen belongings or repairs the inside of your condo after a covered event; it covers what your HOA won’t. Condo insurance also provides liability coverage in case a guest is injured while visiting you. It typically includes:
- Personal property coverage: This means your furniture, belongings, clothing, laptop, TV and more are covered.
- Condo dwelling coverage: This is different from a standard homeowners insurance policy. Condo insurance often covers the condo’s exterior and the condo owner's HO-6 policy kicks in for interior things like cabinets, floors, carpets, interior walls, fixtures and countertops. Dwelling coverage will kick in if a pipe in your condo bursts — it will repair or replace any damaged interior up to your policy coverage limits.
- Loss-of-use coverage: If you have to move out temporarily while your condo is being repaired or rebuilt, your additional living expenses will be covered.
- Liability coverage: If you’re found to be at fault for someone’s injuries or property damage, medical costs and legal fees will be covered.
Ideally, your condo insurance and HOA insurance would overlap perfectly, but sometimes you might end up overpaying.
Covers outdoor spaces like parking lots, garages and sidewalks
Covers individual units like your inner walls, floors, plumbing, carpets, electrical, cabinets and built-in fixtures
Covers recreational areas like swimming pools, tennis courts, party centers, conference rooms and playgrounds
Covers personal possessions like clothing, furniture, electronics and kitchenware
Covers common spaces like lobbies, staircases, hallways and elevators
Covers valuables like art, jewelry and more at specified limits
It’s best to compare quotes from different insurers and shop around for condo and homeowners insurance to ensure that you’re getting the best possible rate and coverage. SmartFinancial can help you protect your residence and personal property, just enter your zip code below and answer a few questions to get insurance quotes in your area.