Condo and co-op homeowners insurance: What you should know

If your condo is part of an HOA, you’re covered by two policies, not one. Your HOA’s master policy covers the building itself, the structure, common areas, and liability for injuries in shared spaces like the lobby or pool. But it stops at your front door. To protect everything inside your unit, you need your own condo insurance, called an HO-6 policy.

An HO-6 policy covers your personal belongings, your unit’s interior finishes, and your liability if someone’s injured inside your home. How much of your unit the master policy handles depends on its type, so some leave you responsible for just your belongings, while others leave everything past the bare walls, including cabinets and flooring, up to you. The first step is to ask your HOA for a copy of the master policy so you know exactly where its coverage ends and yours needs to begin.

Do you need condo insurance if your HOA has a master policy?

Even with an HOA master policy in place, you still need your own condo insurance, called an HO-6 policy. The master policy covers the building and shared spaces, but not what’s inside your unit. That’s the gap your HO-6 policy fills, protecting your interior, personal belongings, and personal liability.

“The master policy protects major building components like the foundation, roof, siding, plumbing, and wiring,” says Griffith Harris Jr., owner and principal of Griffith E. Harris Insurance Services. “It ensures that the building can be repaired or rebuilt after a large loss.”

The easiest way to understand the split is by example. Imagine a fire breaks out in your building’s hallway and damages the shared roof and structure. The master policy covers those repairs. But if smoke damages the furniture or walls inside your unit, that’s where the master policy stops and your HO-6 coverage takes over.

What your HOA’s policy covers

Your HOA’s master policy protects shared property, the building’s structure, roofs, hallways, and amenities like pools or gyms. It covers two things: property damage that repairs or rebuilds the building after a covered peril, and liability if a guest is injured in a common area. It doesn’t extend to injuries or damage inside your individual unit.

How much of your unit’s interior it covers depends on the type. The more comprehensive the policy, the less you’re responsible for rebuilding yourself.

What your HO-6 policy covers

Your HO-6 policy fills the gaps the master policy leaves behind. It typically covers:

• Interior of your unit — Walls, flooring, cabinets, and fixtures inside your space.
• Personal belongings — Furniture, electronics, clothing, and other items you own.
• Personal liability — Costs if someone is injured inside your unit and sues you.

What isn’t covered by an HOA master policy?

No matter which type of master policy your HOA has, it won’t cover your personal belongings, liability for injuries inside your unit, or damage from floods and earthquakes. That’s what an HO-6 policy is for.

A few of these gaps are worth understanding before you look at how they break down:

• Liability inside your unit. If a guest is injured in your condo, the master policy won’t cover it. That responsibility falls on you.
• Loss assessment. If a shared loss exceeds the master policy’s limits, your HOA can bill unit owners for the difference. Loss assessment coverage, an add-on to your HO-6 policy, helps pay your share.
• Flood and earthquake damage. These are excluded from nearly all master and HO-6 policies alike. You’d need a separate flood or earthquake policy to be covered.

Here’s how these gaps play out across the three master policy types. Notice that some items, like your personal belongings and liability, aren’t covered by any of them.

How do you choose the right condo insurance coverage?

To choose the right condo coverage, start with the gaps your HOA’s master policy leaves behind, your personal belongings, interior finishes, and liability inside your unit. Once you know what you’re insuring, a handful of choices shape how well your policy protects you, and how much you’ll pay. Here’s what to weigh.

• Choose replacement cost over actual cash value when you can. Replacement cost pays to replace your belongings at today’s prices, while actual cash value subtracts depreciation, so you get less for older items. Replacement cost raises your premium slightly but pays out far more at claim time, which is why most experts recommend it.
• Pick a deductible you could cover tomorrow. Your deductible is what you pay out of pocket before coverage kicks in. A higher one lowers your monthly premium but costs you more when you file, so set it at an amount you could comfortably absorb if something happened today.
• Set your limits high enough to rebuild and protect your savings. Your personal property and liability limits should be enough to actually replace what you own and shield you if you’re sued. Underinsuring to save a few dollars a month can leave you short when it matters most.
• Add loss assessment coverage to cover your share of a big HOA loss. If your HOA bills unit owners for a shared loss beyond the master policy’s limits, this add-on helps pay your portion, a gap many condo owners don’t realize they have.
• Schedule high-value items with a floater. Also called scheduled personal property coverage, a floater adds protection for things like jewelry or art that exceed your standard policy’s limits.
• Ask about every discount you might qualify for. You may save by bundling your condo and auto policies, installing a security system, or maintaining a claims-free history, but you often have to ask.

How do condo associations get a master insurance policy?

A condo master policy is purchased by the building’s board of directors or management company, not by individual unit owners. It can take weeks or even months to finalize.

Here’s how the process usually works:

1. The board assesses the building’s replacement cost. This determines how much coverage is needed to rebuild the property if it’s destroyed.
2. The board or management gets quotes from insurers. This includes major carriers like State Farm as well as insurers that specialize in HOA and condo association policies.
3. The building and grounds are inspected. Insurers typically need to evaluate the property before finalizing coverage details and pricing.
4. The board chooses a policy type and coverage limits. This includes deciding between bare walls, single-entity, or all-in coverage, plus add-ons like equipment, outdoor areas, or liability coverage, based on the association’s needs and budget.
5. The policy is finalized and communicated to owners. Once in place, unit owners can review the master policy to see what it covers and identify gaps to fill with their own HO-6 policy.

“Condo associations choose a master policy based on the building’s replacement cost. At a minimum, it covers the building and common areas but may include equipment, outdoor areas and liability coverage,” says Paul Schneider, president of Schneider Insurance. “The specific coverages and limits can vary significantly between policies based on the association’s needs and budget.”

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