How Does Being Part of an HOA Impact Your Insurance?
Depending on where you live, being part of a homeowners association or HOA can be a rare luxury or almost unavoidable. When you’re buying a new house or condo that’s part of an HOA, it’s important to understand what the HOA provides, how much the monthly fees will be, and how your homeowner’s insurance is impacted.
How Do HOAs Work?
There are different types of HOAs and they all have their own rules, a board to run them, and different types of homes. A neighborhood of single family homes will be different than a complex of townhouses or a building filled with condominiums. HOAs will offer different amenities, and the monthly fees will vary from one HOA to another.
Typically, HOAs oversee all of the common areas of a neighborhood or property. This includes, but isn’t limited to, recreation facilities, parking lots, pools, lobbies, roads (if private), and gates. The HOA also makes rules that owners within the community must follow. Rules may govern pets, noise, building materials used within your home, yard work, and the exterior of your home.
The HOA is also supposed to carry insurance on the parts of the property they own. This may be referred to as a Master Policy. It covers everything that belongs to the association as well as liability for accidents that happen on the property and other damage or injury that occurs to visitors, employees, vendors, and others.
What Insurance Do You Need as a Homeowner?
Before you buy your home or move into the homeowner’s association, take a good look at the HOA documents. You need to make sure the HOA carries enough insurance. If you’re not sure, ask questions. You want to live within an HOA that takes care of their responsibilities. If not, all owners in the HOA could be made to pay additional assessments to cover damage that their insurance didn’t pay for.
Once you’re sure the HOA is doing their part, it’s time to make sure you have enough insurance for your home. If you financed your mortgage with a lender, they’ll require homeowner’s insurance as well. The kind and amount you need depends on the type of home you buy.
Single family home: Buy a traditional homeowner’s insurance policy. You’re responsible for insuring the entire property.
Condo or townhouse: Buy condo owner’s insurance. This policy presumes most of the building is insured by the HOA. Your policy will cover your personal belongings called “contents” as well as the flooring, cabinets, and appliances.
For condo and townhouse owners, you’ll need to ask your HOA what they consider your responsibility for insurance. Some HOAs say that owners must insure either from the wall in or the studs in. Studs in means that you’re responsible for the drywall, too. Wall in means the HOA is responsible for the drywall.
You may also want to consider loss assessment coverage. This helps protect you in the event your HOA charges you an assessment on an insurance claim. How can this happen? If the HOA makes a claim - like a liability claim that results in a lawsuit - that’s higher than their policy limit, they can charge each owner an assessment to help pay it. With loss assessment coverage, you may be able to avoid paying all or part of the assessment.
An HOA can provide great community amenities and even lower the cost of your homeowner’s insurance. Even though your monthly HOA fees help pay for the Master Policy, this doesn’t mean you don’t need insurance coverage, too. Understanding what the HOA is responsible for will help you choose the right homeowner’s or condo insurance policy.
If you’re moving to a home or condo that’s part of an HOA, contact Ross Insurance today so we can make sure you have the right insurance policy at the right price.