HOA INSURANCE insurance package, which typically includes:
• General Liability: Covers injuries in shared spaces, like someone slipping on ice in a walkway.
• Crime Insurance: Protects the HOA’ s funds from theft or embezzlement.
• Directors And Officers( D &): Shields board members from lawsuits related to their decisions.
• Umbrella Insurance: Adds extra liability coverage above the standard policies.
For single-family HOAs, the policies usually cover common areas and amenities. In multifamily HOAs, like condos or townhomes, insurance becomes more complex. The association typically owns the building exteriors and shared spaces, while individual owners are responsible for their units’ interiors( like walls, floors, and personal items).
MASTER POLICY VS. HOMEOWNERS( HO-6) POLICY AND HOW THEY WORK TOGETHER
In a multifamily community, the HOA’ s master policy covers the building’ s exterior, while each homeowner carries a personal HO-6 policy for the interior and personal belongings. If a fire damages the building, the master policy pays to rebuild the outside and your HO-6 policy helps restore your unit inside. It’ s a team effort, ensuring the whole property is protected.
WHY HOAS AND HOMEOWNERS NEED DIFFERENT COVERAGE
Single-family homeowners insure their own houses. If a fire happens, their personal policy pays to rebuild. In a multifamily HOA, the master policy covers the structure, and the HO-6 policy covers the inside of each unit. This division is crucial: gaps can expose homeowners without proper coverage on both sides.
SPECIAL ASSESSMENTS AND LOSS ASSESSMENT COVERAGE
Sometimes, HOAs need to charge extra fees, called special assessments, to cover significant expenses, such as a new roof or major repairs that weren’ t budgeted for. There’ s also loss assessment, which happens when the HOA’ s insurance doesn’ t fully cover a loss. For example, if a $ 1 million building is underinsured for only $ 800,000, homeowners may be responsible for the 20 % shortfall.
With rising deductibles, especially in places like Minnesota, where hail damage is common, these assessments can reach tens of thousands of dollars per homeowner. That’ s why loss assessment coverage on your HO-6 policy is so important. This coverage helps pay for your share of the special assessment after a covered event so you’ re not left with a huge bill.
WHY ARE HOA INSURANCE PREMIUMS AND DEDUCTIBLES RISING?
In recent years, insurance costs for HOAs have soared, particularly for multifamily properties. Severe weather, like hailstorms, has led to more claims, and insurance companies have paid out more than they collect in premiums. In Minnesota, for example, loss ratios have approached 200 %, meaning insurers pay almost twice as much as they take in.
Many HOAs have raised their deductibles to manage costs. This lowers the premium but means homeowners could face larger unexpected bills if a claim occurs. When a big claim happens, the HOA may assess homeowners to cover the deductible, making loss assessment coverage on your HO-6 policy more critical than ever.
HOW TO PROTECT YOURSELF AS A HOMEOWNER WITHIN AN HOA
• Review Your HO-6 Policy: Make sure you have enough loss assessment coverage. This can save you from paying out of pocket for an extensive assessment.
• Coordinate Coverage: Your personal policy and the HOA’ s master policy should work together seamlessly. At Nesbit Agencies, we recommend having your agent review these policies to avoid coverage gaps.
• Check For Inflation Guards: Many policies now include inflation guards, automatically increasing coverage to keep up with rising costs.
• Know Your Responsibilities: Read your HOA’ s governing documents to understand what you’ re responsible for insuring.
REAL-WORLD EXAMPLE
Imagine a hailstorm damages your condo building’ s roof. The repair bill is $ 1.5 million but your HOA’ s deductible is $ 250,000. If the HOA doesn’ t have enough in reserves, it issues a special assessment to each homeowner. If you have loss assessment coverage on your HO-6 policy, you can file a claim, and after your deductible, your insurance helps cover your share.
NESBIT AGENCIES IS YOUR PARTNER IN HOA INSURANCE
At Nesbit Agencies, insurance is designed to simplify your life, not complicate it. We work closely with HOAs and homeowners to review policies, check for gaps, and ensure everyone is protected. Our team regularly checks in with clients, renews HOA insurance policies annually, and encourages open communication between personal agents and HOA policy managers.
If you’ re a homeowner or serve on your HOA board, let us help you review your coverage and answer your questions.
Contact us at 952-941-9418 or visit us at NesbitAgencies. com for a personalized review so that you can enjoy your community, worry-free. +
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