Whether you live in a single-family home in a neighborhood with a Homeowners Association or a condo with a Homeowners Association, you need to research the coverage your HOA has and what protection it offers for each property owner. Understanding the coverage of the association prevents you from having gaps in your coverage that could cost you later.
If you live in a single-family home, your homeowners association most likely owns the community buildings, pool, and possibly the streets. They do not own your home or your land, even though they may have to approve changes to your property.
In a multi-family residence like a condo building, your homeowners association owns the common areas and some portion of the exterior walls of your home. Most condo associations define the portion you own of your condo as studs in, meaning you are responsible for the drywall and the interior of your home, or walls in, meaning you are responsible for the interior of your home but not the drywall.
Review the HOA bylaws to determine what they are responsible for maintaining and insuring. After you understand what you are responsible for and the association is responsible for, review their master insurance policy.
In the HOA bylaws maintaining proper insurance on the community property is required. If the HOA is underinsured, you may be partially responsible if a claim happens on community property.
Stay involved in your HOA and their insurance decisions to protect your interest. The decisions made by the board of directors can affect your property and the coverage you need to protect yourself.
If you become a board member, review the bylaws and make sure your liability from being a board member is covered. If it is not covered on the master policy, consider purchasing an umbrella policy.
Umbrella policies cover liability in excess of your homeowners policy and in some cases, liability claims that are not covered, such as serving on an HOA board of directors.
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Single Family Dwellings, Homeowners Insurance, and HOAs
The insurance your HOA provides protects your liability in the common areas and protects commonly owned property. It does not cover any portion of your home or your liability on your personal property.
Mortgage companies will require proof of both your HOA insurance and your homeowners insurance every year. These policies act together to protect yours and your mortgage company’s interest and liability.
Homeowners associations may require certain limits of personal liability and medical payments. They require each property owner to maintain certain limits of liability to protect the community.
If someone is injured on your property, they can sue the HOA. Matching liability limits on all the homeowners policies in the HOA area protects everyone. If someone is injured on your neighbor’s property you know he has limits to protect his interest and the HOA’s interest.
Multi-family Dwellings, Condo-owners Insurance, and HOAs
Your Homeowners Association insurance protects the common areas of the property and a portion of your exterior walls. Their insurance does not cover your liability in your residence or any of your property.
HOAs may require you to have a matching liability limit to their policy. In multi-family building, what would be a minor claim in a single-family dwelling can be major.
A broken water pipe can go from a minor annoyance for one condo owner to a major liability claim for multiple property owners. Fire in one condo can cause extensive smoke damage to adjacent condos.
Your condo-owners policy limits for your dwelling need to cover your portion of the walls, either from the studs in or from the walls in, any permanently attached appliances like your water heater or a built-in range, interior fixtures, and the portion of the roof or ceiling you are responsible for. The contents coverage on your policy covers everything in your home, appliances that are not built in, clothing, furniture, anything you own that is not attached to the home.
Any patios or decks that are attached to your home need to be covered by your dwelling coverage. Verify with your HOA that these need to be included in your coverage, depending on the wording of their bylaws their policy may cover them.
The loss of use of your policy is important. If your condo is damaged and you cannot stay there, this coverage will pay for a hotel or replacement condo while yours is being repaired. Loss of Use on the Condo-owners policy will pay regardless of who caused the damage to your condo. If your neighbor caused the damage to your condo, the loss of use coverage still protects you.
So, do I need Home Insurance with an HOA?
Yes, every property owner needs insurance to protect their property. HOA insurance protects the common buildings and any community features like pools, parking lots, or playgrounds.
The master policy for the HOA protects you from suits filed by employees of the HOA or property management employees. It protects you from liability and suits from the community features, such as the pool and playground.
Your homeowners or condo-owners policy covers your personal property. You can add endorsements that are important to you like earth movement, sewage backup, or flood. If you have high-value jewelry, furs, or electronics they can be covered on your personal policy.
Review your HOAs master policy and bylaws to verify the limitations of the policy and see what coverage you need to carry to protect your interests.
If your home or condo is financed, your mortgage company will require you to carry a homeowners or condo-owners policy to protect their investment in the property. Even after you own your property outright, keeping homeowners or condo-owners insurance is required by most HOA associations.