Most states require homeowners’ and condo associations to carry specific insurance coverages. Often, rather than purchasing several different insurance policies, the HOA will opt to purchase a master policy, which includes the various coverages that the board chooses. They will pay one premium, which is most often funded through association dues.

Master Policy

A master policy offers what is known as “walls out” coverage, meaning that it does not cover the interior of any units; therefore, it does not protect homeowners or  homeowner property.  It covers only public or common areas of the community or building, such as common walls, lobbies, stairways, elevators, lakes, playgrounds, pools, or fitness centers.  All homeowners must purchase their own individual insurance policy to cover personal liability, physical damage within the unit, and personal property.

What Does it Cover?

The association’s master policy will most likely include both liability and property coverage:

  • The liability policy will cover any legal or medical costs associated with any lawsuit filed for an injury that happens in the common areas of the community. For example, if a person slips on ice or gets into an accident on the playground or at the pool.
  • Property coverage protects only common property such as elevators, roofs, courtyards, pools, clubhouses, etc. Adequate property coverage will ensure that the HOA is protected against damage that happens to the common areas as a result of wind, fire, water, crime, or vandalization.

Remember there are often exclusions regarding how the damage is inflicted. For example, it is usually required that a person purchases separate flood insurance, as flooding is not generally covered under a property insurance policy. Sometimes the master policy will also include fidelity insurance, which essentially protects the HOA from any dishonest actions of the officers or board members.

Refer to the Governing Documents

The HOA governing documents should specify exactly what is covered and what is not covered by the HOA policy so that the board, current homeowners, and prospective homeowners are all informed.

Though the HOA Master Policy protects only the commercial side of the HOA, the importance should not be underestimated by members of the board or members of the community at large. This is an issue that affects everyone.  If the HOA does not carry sufficient insurance coverage, homeowners’ investments will be put at risk. Additionally, it is important to remember that members of an HOA can be held liable for damages related to incidents that take place in the common areas.  In effect, if the HOA does not have adequate coverage, the homeowners could find themselves in big trouble.

Speaking with a qualified and informed insurance agent can put your mind at ease, knowing that everything has the proper coverage and protection should the unthinkable happen. Contact the experts at Blue Lime Insurance Group today to explore your options.

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