What Is HOA Insurance and When Is It Required?

Homeowners association (HOA) insurance is a type of commercial insurance policy that covers property owned by an HOA and shields leaders, volunteers and other members from lawsuits in situations where the HOA is found liable for a person’s injury or damage to their property.

HOAs may be required to maintain a minimum amount of insurance depending on where they are located. As a member of an HOA, you are not personally responsible for purchasing coverage but some of the money you pay in HOA fees will go toward covering the HOA’s insurance premium.

Keep reading to learn more about how HOA insurance works and what additional coverage types HOA members need to buy to fully protect their own homes and belongings.

On This Page

• 

  What Is an HOA?

• 

  What Is HOA Insurance?

• 

  How Does HOA Insurance Work?

• 

  How Much Does HOA Insurance Cost?

• 

  What Are the HOA Insurance Requirements Where I Live?

• 

  Who Pays HOA Insurance Deductibles?

• 

  Why Should You Get HOA Insurance?

• 

  How To Get HOA Insurance

• 

  FAQs

What Is an HOA?

A homeowners association (HOA) or condo association is an organization consisting of the residents of a certain neighborhood or condo. Depending on the state it is in, an HOA may be required to register as a nonprofit corporation.^[1] HOAs are typically run by a board of directors made up of volunteers who live in the community and are members of the HOA themselves.

If you move into an area that is governed by an HOA, you will generally have to join the HOA and pay monthly dues to cover the services it provides. These services can include setting up community-wide security systems, managing common areas like swimming pools or tennis courts and more. The HOA board may also enforce certain regulations such as what color you can paint your house and how often you must mow your lawn.

What Is HOA Insurance?

HOA insurance is a type of commercial insurance that generally insures common areas and other HOA-owned property against covered perils and provides liability coverage in case someone is injured or their property is damaged while they are on HOA-owned property. In addition, HOA insurance can cover legal expenses if an HOA member is sued for decisions they made or actions they took in their capacity as a director, officer, trustee, employee or volunteer.^[2]

If you live in a condo, your condo association’s master insurance policy should cover shared spaces within the building as well as the external structure of your unit such as walls, floors and ceilings.

It may also cover built-in fixtures and appliances inside of your unit like kitchen cabinets and washer dryers, although this isn’t always the case. As a result, you may need to purchase separate condo insurance to cover the interior structure of your unit.^[3]

Meanwhile, if you live in an HOA-governed neighborhood with unconnected houses, your HOA’s insurance won’t provide any coverage for your home like a standard home insurance policy would. Nevertheless, HOA insurance can still protect you indirectly since any costs the HOA incurs will ultimately fall to its members in the form of special assessments, which are extra fees your HOA may charge in addition to your regular dues in certain situations.

How Does HOA Insurance Work?

If you are a member of an HOA without any sort of leadership position, you don’t have to purchase HOA coverage yourself. Instead, you will contribute your share of the insurance premium by paying your regular HOA fees. It is the responsibility of the board to deliver the premium payments to the insurance company and file insurance claims if necessary.

There are numerous coverage types that could be included in an HOA or condo association insurance policy including the following:^[4][5]

• General liability insurance
• Commercial property insurance
• Commercial crime coverage
• Ordinance or law coverage
• Directors and officers (D&O) liability insurance
• Sewer and drain backup coverage
• Inflation coverage
• Commercial auto insurance
• Employment practices liability insurance (EPLI)

How Much Does HOA Insurance Cost?

If you manage the finances for an HOA, you should plan on setting aside at least $57 to $79 per month to pay for the HOA’s general liability insurance.^[6] Meanwhile, rank-and-file HOA members can do their part to secure coverage by simply paying their monthly HOA fees. The average HOA fee throughout the United States was around $191 per month in 2021.^[7]

What Are the HOA Insurance Requirements Where I Live?

HOA insurance requirements vary from state to state. For example, for individual HOA members in California to avoid being held personally liable for HOA-related bodily injury or property damage claims, the HOA must maintain at least $2 million or $3 million in general liability insurance depending on the number of HOA members. The HOA must also maintain at least $500,000 or $1 million in D&O liability insurance for volunteer directors and officers to avoid personal liability.^[8]

Who Pays HOA Insurance Deductibles?

Oftentimes, HOA members will each pay a portion of the HOA insurance deductible, which is the minimum amount of money the HOA must contribute out of pocket toward every claim. The deductible may be evenly split among members through special assessments or the HOA could cover it using money that members have already paid in regular dues. In some cases, a single member could be responsible for covering the entire deductible if they were solely at fault for a covered accident or the only one impacted by a covered peril.

Why Should You Get HOA Insurance?

HOA insurance coverage is crucial if you are in charge of running an HOA because it enables you to protect yourself and other members from bearing the full financial burden of a costly liability lawsuit. In addition, HOA property coverage ensures that damaged common areas can be repaired in an efficient manner.

Meanwhile, individual HOA members may want to add loss assessment coverage to their condo or homeowners insurance policies. This coverage type can take care of your share of the HOA insurance deductible or a special assessment you have to pay after a claim exceeds the master policy’s coverage limits.

How To Get HOA Insurance

It’s recommended that condo or homeowners associations shopping for the right policy compare quotes from three to five insurance companies. Each insurer may request information such as the location of your HOA and the amount of money you bring in through regular HOA fees. Naturally, contacting multiple insurance carriers individually can be a drawn-out and tedious process.

Fortunately, you can streamline this process by using an insurance marketplace such as SmartFinancial. Our questionnaire can quickly collect information about your coverage needs and budget and then match you up with agents who can offer you some of the best policies available to you. Type your zip code below to start the process of obtaining free commercial insurance quotes today.