As a homeowner within a condominium complex, you follow the rules and pay the fees of a homeowners association. Your monthly HOA fee covers the costs of maintaining the common areas and services you and fellow owners enjoy. Condos must maintain a minimum amount of insurance coverage through a master policy, which differs from the homeowners insurance policy you purchase for your individual unit. Items covered by the master policy vary by complex and by state law.
Homeowners share ownership of the building structure's exterior and common walls, roofs, stairways, elevators, basements, parking structures and lobbies. The HOA governing documents, known as Covenants, Conditions & Restrictions, contain an insurance section which states what the master policy covers. Two main types of master coverage exist: bare walls-in and all-in. Bare walls-in is the most common type, covering the the structure's exterior framing inward. It excludes features within the condo unit, which you are responsible for insuring. All-in coverage includes fixtures and installations within your walls' perimeter.
The condo insurance master policy covers claims for major work and repairs to the commonly shared parts of the structure after a hazardous or inclement weather event. The type of hazards the policy protects against are outlined in the policy and may include natural disasters, hurricanes, earthquakes, floods, fire and vandalism. A commercial insurance provider is used for HOA hazard insurance.
Homeowners pay a deductible when the HOA files a claim with the insurance company. In addition to the monthly HOA fee which helps pay for the master policy, the HOA may assess an additional fee to pay the deductible, according to Bankrate.com. The deductible is divided by the number of owners and some states may have higher deductibles for condo claims. A high deductible may range from $25,000 to $50,000.
In some states, insurance must cover homeowners associations against lawsuits, according to Lawyers.com. Lawsuits can arise when individuals get injured on the condo premises. An HOA with insufficient coverage can leave individual homeowners responsible for the damages. Additionally, an HOA can buy coverage to protect its employees from lawsuits by condo homeowners. A mistake by an HOA employee that hurts residents can lead to the HOA and individual employees being sued.
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.