HOA insurance: Why it's so important, and what companies specialize in it

Have you got your homeowners association insurance in place? You might not, since it isn’t as common as homeowners insurance or renters’ insurance, but if you like in a condo or another shared building, it will be necessary. Take a look at our guide to understand what you’re paying for.

What is HOA insurance?

To put it basically, HOA, or homeowners association insurance, covers those who live in a condominium or other common property like single-family homes and cooperative apartments, for liability and damage. Due to the fact that condos are shared spaces and shared buildings, there are a lot of communal spaces that no one’s individual insurance will cover, such as the entrance, the halls, the roof, etc. It means you won’t have to be out of pocket if an incident were to occur in a communal area.

There is such a thing as a master policy, which will allow you to pay a portion of the insurance pot, splitting the bill amongst the tenants of the condo. It is considered part of the homeowners association dues.

Why is it important?

Homeowners association insurance covers you and your neighbors, so that no one is adversely affected by the actions of others, or sheer bad luck. Without insurance in place, the homeowners association would have to pay for repairs themselves, which could cause an increase in dues or a special assessment.

There is condo insurance, which fulfills a lot of the same purpose, but, ultimately, might not be open to you. It comes down to the physical limits of the coverage. A homeowners association policy will cover you further than a condo policy might, so if someone were to fall on the pavement outside your apartment, what insurance you have will determine whether you pay out of your insurance does.

All of this adds up to an insurance policy that doubles as a community conference. The homeowners association ensures that the voices of everyone in the vicinity are heard when there is a problem that affects the building. It ensures the upkeep of the local community, including parks, pools, club rooms and other community areas, and protection for any incidents that might occur there. It’s considered instrumental in creating a peaceful and clean environment throughout a community or neighborhood.

What do HOA insurance policies cover?

Primarily, homeowners association covers damage to the building due to fire, wind, hail, and accidental water damage. It also covers liability, should someone get injured while on the property.

However, there are levels and types of homeowners association insurance policies, and you might have to read through them to ensure you have what you need covering.

The overall Master Policy of Honeycomb HOA insurance covers your condo building and common areas shared between tenants, like pools, playgrounds, gyms, and club rooms. The Master Policy is split into three: bare walls, single entity, and all in. The bare walls policy means only the bare structure of one single condo building is covered and doesn’t cover concepts like furnishings or fixtures. To cover those, you’d need single entity coverage. And all covers everything including structure, fixtures, furnishings, and improvements to communal areas.

The main components of the homeowners association insurance policies are made up of Comprehensive Property Coverage, which covers the structure of the building as well as the property inside that is common property or owned by the association, like pool furniture, exercise equipment, clubhouse furniture, etc., Catastrophe Insurance, which protects against natural disasters, Comprehensive General Liability, which covers all the real property in your condo, including original fixtures, Workers Compensation Coverage for the injury of on-site workers, Discrimination Coverage should someone make a legal claim about discrimination, Directors and Officers Liability Insurance, covering legal expenses for homeowners association board members who might need them due to the actions of the board, and Coverage for the theft of goods, merchandise and money during the course of work-related duties.

What do HOA insurance policies not cover?

The distinction should be made that, depending on the policy you go with, you are covered for damage and liability in communal spaces but most likely not for personal property. That means if someone were to step foot inside your home, crossing over from the shared hall to your private home, your homeowners insurance, condo insurance or renters’ insurance should cover any damage or liability.

There is also a limit on how much homeowners association insurance will cover. If the damage goes over the limit, the homeowners association may ask the homeowners to contribute to the repairs.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes