There’s no way around it: Condo insurance can be complicated. That’s because it involves not just one, but two insurance policies: one for the homeowners’ association (HOA) and another for the individual unit owner. These policies are sometimes called the “master policy” and the “unit owner policy,” respectively.
The condo owners pay for both policies. The master policy is paid for collectively and indirectly though HOA dues; unit owner policies are paid for individually and directly.
Each policy contains coverages, deductibles, limits and exclusions, which vary depending on the insurer and the type and amount of coverage that’s purchased.
Since the two policies are in place simultaneously, there can be gaps and overlaps in coverage. Owners need to know what the HOA’s master policy covers, so they can make informed decisions about their individual policy.
To find out the details of the master policy, owners should ask for a copy of it, says Loretta Worters, a spokesperson at the Insurance Information Institute, a nonprofit communications organization supported by the insurance industry.
“As an owner, you want to make sure your association gets the proper coverage. You want to know what the protections are and you need to make sure that you get the right coverage for your personal possessions,” Worters says.
Tips for Condo Insurance Buyers
Being well informed about condo insurance before you make that condo purchase is important, too.
One reason is that community amenities can make the master policy (and the HOA dues to pay for it) more expensive.
“If you have a pool in your condo association, you’re going to pay more because people can get injured,” Worters says.
If you’re buying a condo, you also need to be aware that mortgage lenders typically require both the master and unit owner policies to be in place before a loan can be funded.
Types of Condo Insurance Policies: Bare Walls In or All In?
Master policies come in two types, known in insurance industry jargon as “bare walls in” and “all in.”
Bare Walls In
A “bare walls in” policy covers the building’s exterior and common elements. That usually includes the walls, ceilings, roof, elevators, walkways, balconies and exterior lighting. Interior elements, such as cabinets, plumbing and appliances, are not typically covered. Personal possessions are excluded as well. When the HOA’s master policy is “bare walls in,” condo owners need to be careful not to buy a too-skimpy individual policy.
An “all in” policy typically covers the building’s exterior and interior elements. There’s an important caveat, however, which is that this type of policy might not cover interior elements that an owner has upgraded. Personal possessions are excluded as well. When the HOA’s master policy is “all in,” owners can save money by not buying more individual coverage than they need.
Condo Master (HOA) Insurance Policies: Bare Walls or All In
|Bare Walls In||All In|
|Building exterior, including walls, |
ceiling roof, common-area elevator,
parking garage, walkways, etc
|Interior elements, like appliances, |
cabinets, fixtures, plumbing,
|No||Yes, but upgrades|
|Personal possessions, like clothing,|
furniture, electronics, and jewelry
|Insurance risk for the condo owner||Not buying |
|Buying too much |
Your Individual Policy
Individual condo policies don’t cover everything that can happen to your personal possessions. Loss, damage and destruction due to insured risks, such as theft or fire, are covered. Normal wear and tear is not.
Condo owner policies contain deductibles and caps, known as limits, which apply to valuable categories like jewelry, artwork, electronics and musical equipment. If your personal possessions are worth more than your policy’s limits, you can purchase an endorsement to raise the limits. Endorsements are also called floaters or riders.
Individual policies usually include coverage for liability and additional living expenses, or ALE.
Liability coverage helps to protect your personal assets if someone other than you is injured on your property. Two examples are trip-and-fall accidents and dog bites. Some insurers exclude certain dog breeds, so you if you have a dog, you should ask whether your breed is covered when you shop for a policy.
ALE coverage reimburses you for extra living expenses for housing, meals, laundry and other necessities if your condo becomes uninhabitable due to an insured loss, such as a fire.
Condo Insurance Add-Ons
HOAs and condo owners can also purchase additional insurance coverage for specific situations. Here are four examples:
- Crime. This HOA coverage protects the HOA from losses due to employee theft, embezzlement or dishonesty.
- Water backup. This individual coverage protects you from losses if a sewer pipe or drain clogs and wastewater that should flow out backs up into your condo.
- Refrigerated products. This individual coverage covers you from losses if there’s a power failure or mechanical problem that affects your refrigerator or freezer and your cold food and beverages spoil.
This coverage reimburses you if your HOA suffers a loss that’s covered by the HOA’s master policy, but the coverage isn’t sufficient.
“The insurance company pays all or a portion of that assessment, depending on the coverage amount relative to the amount of the assessed loss,” says Jenny Saint Preux, a personal insurance agent at HN Insurance in Alpharetta, Georgia.
The bottom line is that condo owners and buyers should be familiar with their HOA’s master policy and purchase their own individual policy to fill in the gaps.
Marcie Geffner is an award-winning freelance reporter, writer and editor in Ventura, California. In the last decade, she has penned more than 1,000 published stories about residential and commercial real estate, banking, credit cards, computer security, health insurance and small business, among other subjects. Editors describe her as “detail-driven,” “conscientious,” “smart” and “incredibly versatile.” Her award-winning reporting has been lauded as “rock solid,” “spot-on relevant,” “informative,” “engaging,” “interesting” and “nuanced.” Her stories have been cited in seven published nonfiction books and two U.S. Congressional hearings.
Prior to her freelance career, Geffner was senior editor of California Real Estate magazine. Later, she became managing editor of Inman.com, an independent real estate news website. She also has prior employment experience in technical writing, corporate communications and employee communications. She received a bachelor’s degree in English with high honors from UCLA and master’s degree in business administration (MBA) from Pepperdine University in Malibu, California. She enjoys reading, home improvement projects and watching seagulls at the beach.