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

Paying your homeowners insurance premium secures coverage against sudden property damage and personal liability claims, while paying your homeowners association (HOA) fees protects against foreclosure and allows your board of directors to manage HOA-owned property and fund other community efforts.

Keep reading for a better understanding of homeowners insurance vs. HOA differences and to learn when you may need to pay for both.

On This Page

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  Are Homeowners Insurance and HOA Fees the Same?

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  What Is an HOA Fee?

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  When Do I Need To Pay HOA Fees?

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  When Do I Need Home Insurance?

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  Do HOA Communities Offer Insurance Coverage?

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  FAQs

Are Homeowners Insurance and HOA Fees the Same?

Homeowners insurance differs from HOA fees in that home insurance covers your property including your home and belongings along with liability concerns associated with your property. Conversely, HOA fees go to your home or condo association’s board of directors to help them cover the upkeep of property shared by all members and other HOA-related expenses.

What Is an HOA Fee?

HOA fees are the dues you must agree to pay on a regular basis in order to live in a planned community or condominium governed by an HOA. The average mandatory fee for HOA community residents was $191 per month in 2021.^[1] Your HOA fees may go toward covering the maintenance of shared amenities like the following:^[2]

• Playgrounds
• Parks
• Tennis courts
• Gyms
• Private roads
• Swimming pools

They may also help the HOA pay for landscaping, insurance, utilities, administrative expenses, community events and repairs for shared spaces including the exteriors of townhouses and condo units. Finally, your payments may help the HOA board create a reserve fund that can be used to cover larger expenses that may arise unexpectedly later on.^[2]

When Do I Need To Pay HOA Fees?

You will typically have to pay HOA fees on a monthly basis but some homeowners associations only require you to pay dues quarterly instead. Before purchasing a house or condo, you should know up front whether it is part of an HOA and whether you will be required to pay regular dues to stay there.

Keep in mind that, although HOAs can provide useful services such as community-wide security systems, they may also set restrictions for your property such as how often you have to mow your lawn and what colors you are allowed to paint your house. As a result, Milly Barker, an international lawyer and the founder of RemotePad, suggests weighing the pros and cons before buying a home that is part of an HOA.

“There can be conflicts between residents and the HOA board, especially if the board enforces rules too strictly or mismanages funds,” Barker said in a message to SmartFinancial. “Prospective buyers must review the HOA’s covenants, conditions and restrictions (CC&Rs) and assess whether they are comfortable adhering to them.”

When Do I Need Home Insurance?

Home insurance is not required by law in any state but it is usually required by mortgage lenders. In addition, an HOA may require you to show proof of homeowners insurance coverage before you can purchase a house within the community. Regardless of whether it’s required for you, home insurance is recommended since it provides protection for what is most likely your most significant asset.

What Does Home Insurance Cover?

A standard homeowners insurance policy will include the following six coverage types:

1. Dwelling: Dwelling insurance covers the physical structure of your home as well as structures that are directly attached to it such as a garage or carport. Coverage is usually provided on an open peril basis, meaning all perils are covered except for those specifically excluded by the policy.
2. Other structures: Other structures coverage applies to structures on your property that are not directly connected to your home such as sheds and fences. Many policies also insure your other structures on an open peril basis.
3. Personal property: Possessions like furniture, clothes, electronics and appliances are covered by your personal property coverage. Your belongings are usually insured on a named peril basis, meaning your policy will only cover losses from perils that are specifically named in the policy such as fire and theft.
4. Loss of use: If a covered peril leaves your home uninhabitable, then your loss of use coverage can help you temporarily pay for housing, food and other living expenses as long as these costs exceed the amount you typically spend on regular living expenses.
5. Personal liability: Personal liability insurance covers medical expenses for a guest who is injured on your property and property repairs for a guest or neighbor whose property damage you are responsible for. It can also cover legal fees if a bodily injury or property damage claim escalates into a lawsuit.
6. Medical payments: Medical payments coverage takes care of minor medical bills after someone is hurt on your property, even if you aren’t at fault for the person’s injuries. However, its coverage limits are generally low, so it is best used as a way to prevent legal action that would require a costly claim on your personal liability coverage.

You may also want to consider purchasing an optional home or condo insurance add-on known as loss assessment coverage, which takes care of special assessments issued by your HOA. Special assessments are extra charges your HOA may use to collect money to cover the deductible for a claim on the HOA’s master insurance policy, losses that exceed the coverage limits of that policy or other losses that aren’t covered by the HOA’s policy and that the HOA doesn’t have enough money in reserve to cover out of pocket.^[3]

Do I Need To Pay for Home Insurance if I’m Paying HOA Fees?

Even if you are actively paying your HOA fees, you will still need to purchase homeowners insurance because the HOA will not provide any coverage for damage to your property if you live in a neighborhood with homes that aren’t connected to each other.

Meanwhile, your HOA’s insurance policy may provide some coverage for the external structure of your unit if you live in a condo but you will still generally need a separate condo insurance policy to cover your belongings, additional living expenses and personal liability concerns.

Do HOA Communities Offer Insurance Coverage?

While your HOA generally won’t provide comprehensive insurance coverage for your property or liability issues, it may make you eligible for a discount that lowers your homeowner's insurance premium by about 5% to 10% since the HOA’s rules may lower your exposure to severe property damage or liability claims.^[4]

Additionally, some of the money you pay in dues will likely go toward purchasing a commercial HOA insurance policy that covers damage to shared property caused by sudden and unexpected perils and liability issues that arise from an individual’s bodily injury or loss of property in a common area.

How Does HOA Insurance Work?

Along with covering communal property repairs and medical expenses for injured guests, an HOA insurance policy may cover legal expenses for an HOA director, officer, trustee, employee or volunteer who is sued on account of any actions they took on behalf of the HOA.^[5]

If you live in a condo, your HOA’s master policy may provide limited coverage for the structure of your home, the extent of which depends on which of the following types of policies it is:^[6]

1. Bare walls: A bare walls HOA insurance policy should cover the exterior of your condo building including the roof and walls of your unit along with shared spaces like hallways and lobbies.
2. Single entity: A single entity policy not only covers the outside structure of your individual unit but also covers certain internal fixtures like cabinets that were already built into the unit when you bought it.
3. All-in: The most comprehensive type of HOA master policy, an all-in policy covers all fixed exterior and interior structures including fixtures you add to your unit through home renovations.