A homeowners’ association (HOA) is an organization that establishes rules and regulations by which members of a residential community must abide. Failure to adhere to these rules typically results in fines or other punishments. If a homeowner accumulates a certain amount of monetary penalties due to fines, the HOA could sue or potentially foreclose on the property.
If you live in a condo or another residential community that has an HOA, you may know that there is a type of insurance that provides protection against certain risks and liabilities: HOA coverage. This type of policy is known as a “master policy.” Here is a close look at this subject.
What Is An HOA Master Insurance Policy?
An HOA master insurance policy is paid for by a portion of the monthly membership fees that homeowners within a community pay. The remainder of these fees is used to fund the maintenance and related expenses for common areas such as pools, tennis courts and gyms. A master policy covers liability expenses associated with onsite guest injuries and physical damage to common spaces within a community. All members of an HOA typically pay an equal amount for a master policy, regardless of whether they use the shared spaces within the community or not.
There are three types of HOA master insurance policies:
- Bare walls in coverage
- Single-entity coverage
- All-in coverage
This policy offers the minimum level of coverage for a condo’s structure. This coverage is specific to the drywall, insulation and studs.
This policy provides slightly more coverage than bare walls. The primary difference is that it also covers the exteriors of all walls to include bathroom fixtures, cabinets and top flooring.
As its name suggests, this policy covers all items within a condo, including built-in appliances such as refrigerators, dishwashers and range/ovens.
Condo Insurance vs. HOA Insurance
As structurally beneficial as HOA insurance is, it doesn’t cover occupant personal possessions inside of the home. To protect items such as electronics, clothing, and furniture, requires condo insurance which is similar in coverage to the more commonly known homeowner’s insurance. Most condo insurance policies include dwelling coverage, loss-of-use coverage, loss assessment coverage, liability coverage and medical payments coverage. This type of policy can cost up to $1,000 depending on selected coverage amounts and deductibles, among other qualifiers.
According to HOA Management, a standard $1 million to $2 million general liability policy for small associations can cost anywhere between $57 and $79 per month, which amounts to approximately $684 to $948 annually.
Other Key HOA Insurance Policies
In addition to the master policy, there are other policies that are important for an HOA to have:
Property Value & Replacement
The minimum value for which an HOA must be insured is a property’s full replacement cost. The three main building ordinance insurance coverages are increased cost of construction, demolition and contingent liability. This minimum may vary due to local or lender specific requirements.
For situations in which a homeowner or guest files a lawsuit against the HOA, specific board members may be named in that suit. A Directors and Officers (D&O) insurance policy can cover both the HOA and the board members. Lawsuits involving HOAs can often accrue extensive legal fees and damages making it important for the insured to be adequately protected.
Other important insurance coverages any HOA should have include flood coverage, workers compensation, third-party bodily injury and employment practices liability coverage.
As with any other form of insurance, obtaining multiple quotes, all of which are specific to your unique coverage needs, should be compared and thoroughly explained by an experienced insurance representative. This will ensure sufficient protection for the association, its board and the homeowners, from major risks and liabilities.
Speak To The HOA Insurance Pros
Contact the professionals at Pro Insurance Group to learn more about HOA master insurance policies. We are dedicated to serving as one-on-one advocates for each of our clients, regardless of their unique insurance needs and budget. We also strive to form and maintain long-lasting relationships with our clients.
For a community with a homeowners’ association, (e.g. a condo) a HOA master insurance policy designed for the specific association will provide substantial benefits. This type of policy offers protection from physical damages to common areas within a development, as well as liability coverage, to protect against injuries on the premises.
Call Pro Insurance Group today at (833) 619-0770 or visit us online for more information.