Many of you may be familiar with homeowners insurance, but did you know there’s another type of insurance specific to communities with Homeowners Associations (HOAs)? It’s called HOA insurance, also known as an HOA master policy.
Here’s a quick breakdown to help your clients navigate this sometimes confusing territory:
What is an HOA?
An HOA is essentially a governing body for a community, ensuring everyone adheres to established rules and maintains property values. They manage common areas like swimming pools, gyms, playgrounds, and shared building components like roofs, hallways and lobbies.
What does HOA insurance cover?
This insurance protects the HOA’s investments, covering:
Property damage to shared areas and building components (depending on the policy coverage level). Property damage can be caused by wear and tear over time or a weather event like hurricane or flood.
Liability for injuries sustained by visitors or residents in common areas. For example, if someone gets hurt at the pool, the HOA insurance, not the individual homeowners, would be responsible.
What types of HOA insurance are there?
There are two main coverage levels:
“Studs-out” or “bare walls”: This covers only ceilings, floors, and walls
“All-in”: This covers everything in the unit, including fixtures, appliances and cabinets.
What about condo insurance?
While HOA insurance protects shared spaces, condo insurance protects individual units and the contents. It covers damage within the condo and injuries occurring inside the unit. Think of them as complementary policies, offering complete coverage for the property and its contents. This policy covers personal belongings and reimburses the condo owner if furniture or other items are stolen or damaged in a covered event such as fire, theft or storm.
Why is understanding HOA insurance important?
For homebuyers: Knowing the HOA’s coverage level helps you understand what your condo insurance needs to cover. For example, with “bare walls” coverage, your condo insurance is required to cover the inside of your unit.
For sellers: You can provide valuable insights to potential buyers, helping them understand the financial implications of living in a community with an HOA. Knowing about HOA fees, insurance coverage, and individual homeowner responsibilities can empower them to make informed choices.
It is important that you understand the coverage provided and the financial implications of living in a community with an HOA. If you have any questions about this or condos in general, please do not hesitate to contact me. As a Building Advisor, I have the experience and knowledge necessary to guide you through the real estate process.
