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What's the Difference Between Homeowners Insurance and Homeowners Association Fees?

As a homeowner, you want to do the best for your family by protecting them against the unforeseen. You also want to spend the least possible without compromising on quality. When it comes to insurance, you think much the same way. You own a home or condo and want to be insured properly in case something awful happens, like a burglary, fire or storm.

If your homeowners insurance is tied up with your mortgage, don't worry: they are not connected in any way, even if you've been making lump payments on both. It just means that the lender chose a homeowners policy for you and didn't necessarily make savings a priority. You can change home insurance carriers at any time.

You can change home insurance carriers at any time.

Now, let us tell you the differences between a homeowners insurance policy and a homeowners association master insurance policy so you can decide which you need. You may even be required to carry both especially if you have condo insurance.

Homeowners Association Fee: What Is It?

In the United States, many people live in residential neighborhoods and condominium communities. These planned communities may have a homeowners association in place. A group of property owners who live in shared environments have HOA set rules to govern to maintain the property values of each planned community it oversees.

Home and condo owners that belong to an HOA must pay a homeowners association fee for an HOA insurance policy.

Home and condo owners that belong to an HOA must pay a homeowners association fee for an HOA insurance policy. This membership fee is paid every month to maintain the HOA's residential properties, common areas and amenities.

HOA insurance cost varies between a range of $200 - $500 per month (or higher) and according to a Trulia study, the average monthly fee is $331. You pay these fees on top of your monthly mortgage on a single-family home, subdivision, townhouse or condominium if your property belongs to an HOA.

A monthly HOA fee covers the use of common property.

The terms of coverage for an HOA policy vary depending on the condo association.

A monthly HOA fee covers the use of common property, such as:

  • Landscaping for shared yards
  • Clubhouses
  • Swimming Pools
  • Community parks
  • Fitness centers
  • Entertainment centers
  • Trash removal
  • Fire alarm systems
  • Electricity and utilities
  • Security guard gates
  • Pest control for common areas

What Is HOA Insurance Coverage?

Some homeowners associations and condominium communities offer all-in coverage, which means that not only will you have HOA insurance coverage for the building and common areas, you will also be protected against damages of structural elements, even fixtures, inside your unit. You'd still be responsible for your own condo insurance to protect personal property in case of damage and theft. If you do have these types of losses you'd file liability claims with your insurance company, not the HOA's insurance policy.

Even with an HOA membership, you’d still be responsible for your own condo or home insurance to protect personal property in case of damage and theft.

If you have an HOA, do you still need a homeowners insurance policy? Yes. Jewelry coverage as a standalone policy is not very common, for one thing, though some people buy endorsements to ensure that high-value items are fully covered by a primary property insurance coverage, like a homeowners policy or renters policy. USAA, for example, doesn't cover accidental damage or loss but other carriers do. If your home insurance policy will not cover the cost of your jewelry, it's a good idea to buy extra coverage. The add-on coverage comes in the form of a rider or floater. The limits on these differ from carrier to carrier and so does the coverage. Note that your belongings are never covered by homeowners association insurance.

It's important to find a good match in an insurance company. To get matched with the right insurance agent and carrier, visit here.

Do Single Family Homes Have HOA Fees?

Single family home in developments where there are pools, gyms, tennis courts and more often have HOA fees. These amenities are only to be used by other residents of this community and everyone in the community contributes a monthly payment.

If you have an HOA, you should check first to see if what losses are covered by the fees you pay monthly. You should only look to file a claim on your homeowners insurance if your HOA and home warranty don't cover the problem.

What Do HOA Fees Cover for a Condo?

Condos come in different layouts and sizes. They also offer different types of amenities, often based on geographic locations. Sometimes, HOAs also pay for basic utilities, including water, gas, trash, sewer, snow removal and recycling. In a sense, these dues are a collective bill for the community's monthly coverage fee.

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What Is an HOA Master Insurance Policy?

When you belong to an HOA, you share spaces with other people, including the gyms, pools, and other spaces. HOA members must submit fees to the HOA when every resident has equal access to common areas and the same amenities. HOA insurance takes care of all shared costs. HOA fees cover the cost of maintenance which keeps property value high and there are usually HOA board members tasked with keeping complete minutes and records of all board actions and corporate matters and presenting them to the members of the association at the annual meetings. You can contact your HOA to ask how you can become a board member.

How Does an HOA Master Policy Work for its Community Members?

What does HOA insurance cover? Master policies will pay for the liability portion of expenses that the HOA community incurs.

They also cover damage to your condominium's property and shared common areas. Three HOA insurance coverage will cover the cost of different types of property damage. These policies include:

  • Bare-Walls coverage - This coverage is the most basic type available in your HOA master policy. It provides minimum insurance for the condo's structure. HOA insurance covers property damage to the condo's walls, studs and similar parts of the building.

  • Single Entity Coverage - This type of master policy not only covers the structure of a condo building, but it also provides additional coverage for the interior section of every condo owners' unit, including the interior walls, flooring as well as kitchen or bathroom cabinets and fixtures.

  • All-In Coverage - This condo insurance policy pays for the same coverage as bare-walls and single-entry coverages except it extends coverage to all unit owners' appliances.

Will My Homeowners Insurance or HOA Insurance Policy Take Care of My Damage?

HOA members pay for the Homeowners Association Policy collectively as part of their membership dues. You pay for these amenities and maintenance of these common areas whether or not you use them through your homeowners association fees.

So, which policy would provide coverage if perils damaged your home? It would depend on what type of homeowners master policy and/or homeowners insurance policy you have in place. For instance, if a master policy offers "walls out" coverage, it will only cover the common walls, lobbies, lakes, playgrounds fitness areas of other facilities. You would have your own individual homeowners insurance policy to cover your own personal liability and physical damages to your home and unit.

For instance, if your condo has roof damage, it may be taken care of by your HOA, not homeowners insurance. In this instance, you share the roof with the entire community. If you are own a single-family residence, however, the repairs would be your responsibility, since you don't share your roof as part of a single building. You'll likely be covered by your homeowners insurance.

Homeowners Insurance Policy and What It Covers

Homeowners insurance covers the insured property inside and out. It also covers the loss or damage of personal belongings and injuries that happen while on the property. If a claim is filed or if there are liability expenses to be filed, the insured is required to pay a deductible before home insurance begins to pay for property damage and unexpected expenses. Different policies have different limits.

How Are Payments Issued from a Home Insurance Claim?

The coverage applies to the amount of money it would cost to rebuild or repair the home to its condition the day the incident occurred. The insured is not given a lump sum amount based on the home's value. In that way, home insurance is different from collision insurance on a car, which pays out the value of the car the day the accident occurred.

If you have a house, condominium, townhouse or subdivision (or even rental property), you'll want to make sure you have a good homeowners insurance policy in place that covers damage and legal action, if needed.

Do I Have to Buy Home Insurance?

You'll have no choice but to buy insurance if you have a mortgage, but even if you own the house and have the option of not renewing your insurance policy, remember that your home is probably one of your most important assets that should be protected in the event of a loss that will otherwise cause a major financial setback.

Are There Special Assessments When You File a Home Insurance Claim?

Many people try to file claims for simple fixes here and there that actually costs more in the long run if you don't pay out of pocket. The reason for this extra spend is that you always have to pay a deductible before your homeowners insurance covers a repair or replacement. Pick your battles and only file a claim you can't afford to pay on your own.

Also, remember that your rate will go up with each claim you file. If you file too many claims you risk your insurer dropping you. Other insurance companies will also be hesitant to write you a policy when they see that you are a repeat offender. A simple rule of thumb: File a claim when it's more than a couple of thousand dollars worth of damage and you cannot pay for it yourself.

Expert Advice on Saving Money on Homeowners Insurance

Are you a homeowner who needs an affordable home insurance policy? You can save money on your insurance premium using SmartFinancial's online insurance comparison tools. Our tools are free and can help you secure low home insurance quotes from local companies within your area. On average, homeowners save you up to 40 percent on insurance rates this way. Start by entering your zip code below.

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