Condo Insurance and HOA Insurance: What’s the Difference?
Learn whether you, your association or your neighbor may need to file a claim when there is damage to your condo.
When you live in a condo, your HOA’s (homeowners association) insurance policy and your own condo policy will cover different types of damage to the dwelling, depending mainly on where the loss occurs. This can make it confusing to figure out which policy you should look to in the event you need to file a claim. It’s important to look closely at your condo association documentation, and know the differences between your responsibility and your association’s – and how they may overlap.
What is an HO6 insurance policy?
First, it’s important to know what’s covered on an HO6 policy before we compare a condo policy to HOA insurance. An HO6 policy is homeowners insurance that covers the property interest and personal property of insureds who own a condo. Unlike an HO3 or HO5 that covers the entire structure of your home, an HO6 only covers the interior of your condo. Here are the types of coverages typically available on an HO6 policy:1
Coverage A – Dwelling Coverage:
This typically covers the interior of your unit from the drywall in, depending on your state. Your HO6 policy may pay for things like built-in cabinetry and appliances.
Coverage C – Personal Property:
This covers your belongings, otherwise known as personal property. Your personal property is anything not attached to your home, including furniture, clothing and electronics. This is never included in the HOA’s master policy.
Coverage D – Loss of Use:
This covers additional living expenses above what you would normally spend, if a loss has made your condo unlivable. This also provides coverage for Fair Rental Value for when a covered loss makes the part of your condo rented to others or held for rental by you, unfit to live in.
Coverage E – Liability:
This covers you if you’re legally responsible for someone else’s property damage or bodily injury.
Coverage F – Medical Payments:
This helps cover medical bills for people who are accidentally injured either on the insured’s property or caused by activities of an insured. Medical payments coverage doesn’t extend to members of your household.
Loss Assessment Coverage:
This helps cover you if you’re assessed by your HOA for damage to a shared area of your condo property, such as roofs, pools, stairwells and more. However, this coverage only applies if the assessment is to repair damage from a covered cause of loss such as wind or hail.
There’s no Coverage B – Other Structures on an HO6 policy, as condo owners typically don’t own other structures on the premises. Each type of coverage has a specified limit in your policy. You can find the limits on your Declarations Page.
HOA Insurance vs. Homeowners Insurance
While both condo insurance and HOA insurance are important and necessary, they don’t protect against the same things. Condo insurance is a type of homeowners insurance specifically designed to cover the unique situation of condo ownership. Just as you need condo insurance to protect your condo, your homeowners association, or HOA, needs HOA insurance coverage to protect what it owns and is responsible for. As a member of the HOA, you pay for a portion of the HOA insurance through your monthly dues to the association.
What does HOA insurance cover and what doesn’t it cover?
The HOA’s policy, also known as the “master policy,” covers two main things – liability and property damage.
For property damage losses, the master policy will usually cover the building’s physical structure, as well as common areas, including elevators, roof, basement and other shared spaces.
Master policies can differ to what extent of property damage is covered. They generally fall into one of two categories of coverage: “all-in” or “bare walls.” An all-in policy includes each unit’s structure – the walls, ceilings, floors and fixtures (like cabinetry, lighting and appliances) – as it was originally designed. In contrast, a bare walls policy only covers ceilings and floors, not fixtures. The type of policy your condo association has will affect the amount of coverage you’ll need on your personal condo policy. For example, if your condo master policy is “bare walls,” you’ll need to have more Dwelling Coverage, Coverage A, since things like cabinetry, lighting and appliances wouldn’t be covered by the master policy.
For liability losses, the master policy can cover the cost of legal and medical fees for accidents that occur in common areas such as a swimming pool or clubhouse.
What if there’s damage to my condo because of a neighbor?
While owners of standalone houses may experience property loss due to a neighbor’s neglect, the shared walls and close quarters of condo living make it more likely. If someone living next to, above or below you causes damage to your unit, their personal liability coverage may cover your loss. The cause of loss would have to be investigated to determine who is liable and which policy or policies apply.
A common scenario is when an upstairs neighbor overflows a tub or leaves a faucet running, which then causes water damage in your unit. Your HO6 policy will provide coverage for the interior building aspects that fall within your responsibility, subject to your deductible. Your policy will also cover your damaged personal property. Typically, once a payment is made, your insurer will attempt to recover its payment from the neighbor. However, some condo association bylaws have a provision that waives subrogation against a unit owner in a condo building.
How do I file a claim for damage to my condo unit?
Start by contacting your personal insurance carrier to notify them of the loss. Next, contact your condo association and let them know, along with getting a copy of your condo bylaws or master policy to be viewed by your personal insurance carrier. If you believe a neighbor is involved in the loss, contact them as well. Your personal insurance carrier and your HOA will be able to assist in determining what’s covered by which policy and whose policy should provide coverage. Be sure to take reasonable measures to protect your unit from further damage, and if it’s safe to do so, take photos of the damages before conducting any repairs. To document the extent of the loss and help determine the replacement value, retain all receipts and invoices of work completed.
1Coverage may vary by state and policy.