HOA Insurance Guide: What Your Association Needs and What It Doesn't Cover

What Insurance Does an HOA Need?

Most HOAs and condo associations need four types of insurance coverage:

1. Property Insurance

Covers the physical assets owned by the association: common area buildings, structures, pools, fences, playground equipment, and (for condo associations) the building itself. For HOAs with limited common area structures, property coverage may be a small portion of the total premium. For condo associations responsible for the building, property insurance is typically the largest policy component.

2. General Liability Insurance

Covers bodily injury and property damage claims arising from incidents on association property. A homeowner slips and falls on the pool deck; a guest is injured by a fallen tree limb in the common area; a visitor's car is damaged by a falling gate arm. General liability covers the association's legal obligation to compensate for these incidents.

Minimum recommended: $1 million per occurrence, $2 million aggregate. Many associations carry higher limits given today's legal environment.

3. Directors & Officers (D&O) Insurance

Covers board members personally for claims arising from their governance decisions. A homeowner sues the board for wrongful enforcement of a rule; a rejected architectural modification request leads to a discrimination claim; an election dispute results in litigation. D&O insurance pays the board members' defense costs and any covered settlement.

Board members should never serve without D&O coverage in place.

4. Fidelity / Crime Insurance

Covers theft of association funds by board members, employees, or management company staff. The amount required is often specified in the governing documents or state law — commonly equal to three months of assessments plus the reserve fund balance.

What HOA Insurance Does NOT Cover

**Individual homeowner property.** The association's property policy covers common areas and (for condos) the building. It does not cover homeowners' personal property, interior improvements, or anything inside the unit.

**Flooding.** Standard property insurance does not cover flood damage. Associations in flood zones should consider purchasing NFIP (National Flood Insurance Program) flood insurance for common area buildings.

**Earthquake.** Standard property insurance does not cover earthquake damage. Associations in seismically active areas (including the Bay Area, California) should evaluate earthquake insurance.

**Employee practices.** If the association has employees, Employment Practices Liability Insurance (EPLI) covers claims of discrimination, harassment, wrongful termination, and similar employment-related claims.

The Condo Insurance Gap: Understanding "Walls In" vs. "All In" Coverage

For condo associations, the boundary between what the master policy covers and what the unit owner's HO-6 policy covers is critical — and often misunderstood.

Read your master deed carefully. The insurance clause defines what the master policy covers. Two common standards:

• **Bare walls in (studs-in):** The master policy covers the building structure only. Drywall, fixtures, flooring, cabinets, and appliances inside the unit are the unit owner's responsibility.
• **Original specifications / all-in:** The master policy covers the unit as originally built. The unit owner is responsible for improvements and personal property only.

Make sure all unit owners understand their obligation to carry HO-6 insurance that covers whatever the master policy does not.

Frequently Asked Questions

How often should an HOA review its insurance coverage?

At minimum annually, at renewal. Associations with significant common area improvements, recent construction, or rapidly rising property values should also conduct a mid-year insurance review to ensure coverage limits remain adequate.

What is a certificate of insurance and why does it matter?

A certificate of insurance (COI) is a document that verifies a vendor or contractor carries the insurance coverage required by the association's contract. Require a COI from every vendor before work begins and keep copies on file.

Who decides how much insurance the HOA carries?

The board makes the final decision, typically with input from the association's insurance broker. Some coverage minimums may be specified in the governing documents or required by state law.