How Is Homeowners Insurance Different from Homeowners Association Insurance (HOA)?

Fran Majidi March 20, 2019

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. Many insurance agents will try to make you write all sorts of higher limits and endorsements. If you feel like your insurance agent is gouging you or is not attentive enough, maybe it’s just time to find someone you trust.  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.  Now, let us tell you the differences between a homeowners insurance policy and a homeowners association policy so you can decide which you need. Chances are that you may need both but don’t know it.

Homeowners Association Fee: What Is It?

When you buy your own condo in certain communities, you join a Homeowners Association, a group of property owners in a shared environment. You probably know a homeowners association fee as an HOA fee. It’s a couple of hundred dollars that you pay when you pay your monthly mortgage on a single-family home, subdivision, townhouse or condominium, if your property belongs to a homeowners association.

A monthly HOA fee covers common property, like shared yards and pools, and possibly a clubhouse. In most condos, it also covers the external structures of the building. For instance, if you have roof damage, it may be taken care of by your HOA, not homeowners insurance. If you own a house, however, the repairs are most likely on you, and you’ll likely be covered by your homeowners insurance. 

Some condominium communities offer all-in coverage, which means that not only will you have 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 belongings in case of damage and theft.

If you have an HOA, do you still need a homeowners insurance policy? Well, jewelry coverage as a standalone policy is not very common, for one thing. Most valuables are added to a primary property insurance, like a homeowners policy or renters policy. 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 coverage. USAA, for example, doesn’t cover accidental damage or loss but other carriers do. That’s why it’s important to have a good agent. To get matched with one, visit here.

This is not to say that single family homes cannot have HOA fees. They often do in developments where there are pools, gyms, tennis courts and more. These amenities are only to be used by other residents of this community. 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.

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, sometimes trash, sewer, snow removal and recycling. In a sense, these dues are a collective bill for the community’s monthly coverage fee.

Homeowners Insurance 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, the insured is required to pay a deductible before insurance begins to pay for damages, whatever they may be. Different policies have different limits. Also 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, homeowners 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. You’ll have no choice but to buy one if you have a mortgage, but even if you own the house and have the option of not renewing your policy, remember that your home is probably one of your most important assets that should be protected in the event of a loss you simply wouldn’t be able to pay for without suffering a major setback. The operative words here are “wouldn’t be able to cover,” because 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 insurance covers a repair or replacement.

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. 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.

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