Ever sat in a board meeting and heard someone ask, “Wait, isn’t that the association’s job to cover?” You’re not alone. Insurance is one of the most confusing parts of living in a condo, townhome, or HOA community. Get it wrong, and owners can end up stuck with a big bill after a loss.
The good news: once you break it down, it’s not that hard to follow. Most communities work the same basic way. The association insures the shared property and shared risks. Owners insure their own unit, their stuff, and their personal liability. Where exactly that line falls depends on your state, your governing documents, and your lender’s rules. So don’t assume every HOA works the same way — check your own community’s declaration to be sure.
What the association usually covers
Your association’s master policy protects the buildings and shared spaces everyone uses: roofs, hallways, clubhouses, pools, and other common areas. It also covers the association if someone gets hurt on the property or files a lawsuit. Many associations also carry a policy that protects board members if they’re accused of mismanaging association business. Volunteer leaders shouldn’t have to risk their own money over a decision they made in good faith. On top of that, most associations must carry coverage that protects reserve and operating funds from theft or fraud, whether it’s a board member, an employee, or a management company handling the cash.
What owners usually need
On the owner side, the right policy depends on your type of home. Condo owners typically need a policy built just for unit owners. It fills the gaps the association’s master policy doesn’t touch, things like your walls and floors, your belongings, liability inside your own unit, and a place to stay if your unit becomes unlivable after a covered loss. Owners of single-family homes in an HOA usually carry standard homeowner’s insurance instead, since the association’s policy only reaches common areas, not the house itself. Renters aren’t always required by law to carry insurance, but their lease or the association’s rules often require it anyway. It mainly protects their belongings and covers their liability.
Why this matters for your board
The real risk isn’t one gap in coverage. It’s assuming someone else already has it covered. Boards that clearly explain what the association’s policy covers, and what it doesn’t, help owners avoid nasty surprises (and arguments) after a storm, fire, or water leak. If your association hasn’t reviewed its coverage in a while, it might be time to add it to the next meeting agenda.
Credit: This post was inspired by and draws on ideas from “Insurance in Community Associations: Who Covers What?” by Daniel Brannigan, published on CAI’s Ungated Blog (blog.caionline.org). Read the original article for more detail, including CAI’s companion brochure on community association insurance.
