What is Condo Association Insurance?

If you live in a condo, you’ve likely heard the term "condo association insurance" (also known as a "master policy"). But what exactly is it? And why do you need it in addition to condo insurance?

Let’s break down what condo association insurance is, what it covers, how it works, and why it’s so important for everyone who calls a condo home.

What is condo association insurance?

Condo association insurance covers common areas in the condo community like the building itself, the lobby, hallways, gym, and pool — and sometimes, depending on the insuring agreement of the association and the condominium association master insurance policy, certain interior elements of the units.

The association insurance policy is purchased by the condo association (the people who run the HOA or board) to protect The association purchases a master insurance policy designed to protect the collective interests of the community. 

Personal condo insurance (called an HO-6 policy) is purchased by individual unit owners and covers the individual interests of the unit owner that are not covered by the master policy and covers stuff inside an individual condo unit, such as furniture, appliances, personal belongings, and interior finishes and improvements and betterments (as needed)

Why condo association insurance is so important

Without condo association insurance, one major disaster — like a fire, storm, or expensive lawsuit — could leave everyone scrambling to cover repair costs. 

This insurance can help condo associations and owners:

• Pay for major building repairs after damage

• Cover injuries that happen in shared spaces

• Protect condo board members from lawsuits

• Keep your mortgage lender happy (because most lenders require it)

Basically, it can serve as a financial safety net that keeps the whole community protected.

What does condo association insurance cover?

A master policy usually includes a few key types of coverage:

1. Property coverage (building coverage)

Often covers damage to shared parts of the property, like:

• The building’s exterior walls, roof, and foundation

• Common spaces like hallways, elevators, lobbies, and parking garages

• Amenities like pools, gyms, or clubhouses

This can often times help with problems like fires, storms, theft, or vandalism.

2. General liability insurance

If someone slips by the pool or gets hurt walking through the lobby, this coverage may help pay for:

• Medical bills

• Legal fees if the association gets sued

3. Directors & Officers (D&O) liability

This is designed to protect the board and its members who run the association from being sued for decisions they make on behalf of the community.

4. Fidelity (crime) coverage

This is intended to cover losses if someone steals money from the association or commits intentional dishonest acts (like an unscrupulous board member or employee).

5. Equipment breakdown coverage (optional)

If major building equipment like elevators, HVAC systems, or boilers suddenly and accidentally break down, this coverage may help cover costly repairs. It may cover the cost to repair or replace damaged equipment due to internal breakdowns like motor burnout, electrical arcing, power surges or pressure system rupture. It does not cover normal wear and tear or gradual deterioration.

How does condo association insurance actually work?

Here’s a quick example:

Let’s say a tree falls on the roof during a storm. The condo association files a claim with its insurance company. After paying the deductible, the insurance company typically helps pay for repairs.

Important details:

• The association pays the deductible; sometimes, this cost gets shared among unit owners.

• The board handles renewing the policy and making sure it fits legal requirements.

• Individual unit owners still need their own HO-6 policy to cover anything inside their own units that’s not included in the master policy.

Condo association insurance vs. individual condo insurance

A lot of people mix these up, but they’re different. Here’s a simple side-by-side comparison of the two types of insurance:

Different types of master policies

Not every master policy covers the same things. Here are the main types:

Bare walls policy

Typically covers the outside walls and common areas. Condo owners are responsible for everything inside their unit (walls, floors, cabinets, etc.).

Single entity (walls-in) policy

Usually covers common areas plus the physical parts inside units (walls, built-ins, fixtures). Unit owners are still responsible for covering their personal belongings.

All-in (all-inclusive) policy

The most comprehensive policy. It typically covers common areas and most of the interior structure, including improvements and upgrades made by the unit owner (but still not a condo owner’s personal property).

How much condo association insurance do you need?

The right amount depends on:

• The association's governing documents

• The full replacement cost of the building

• Local risks like hurricanes, floods, or wildfires

• How fancy your amenities are (pools, gyms, elevators, etc.)

• State condo laws

• Mortgage lender requirements

Important:

Being underinsured can lead to hefty “special assessments”, fees where unit owners have to pitch in to cover shortfalls after insurance claims.

What happens if the condo association is underinsured?

If a disaster hits and the master policy doesn’t cover everything, the association may have to collect extra money from unit owners to cover repairs. These surprise bills aren’t fun for anyone.

That’s why regularly reviewing the association’s insurance is so important.

The condo board’s role

The condo board is responsible for:

• Reviewing policies yearly (ideally with an insurance expert)

• Making sure the policy follows state laws and the association’s governing documents 

• Handling claims and organizing repairs

• Helping unit owners understand what’s covered (and what’s not)

And yes, smart boards typically make sure they have Directors & Officers (D&O) insurance too, so they’re personally protected.

Common mistakes condo associations make (don’t be that HOA)

• Forgetting to review policies regularly

• Picking low deductibles that make premiums sky-high

• Not having enough liability protection

• Forgetting about Directors & Officers or Fidelity insurance

• Overlooking certain coverage needs (such as sewer back-up, equipment breakdown, etc.) 

Quick FAQ: Condo association insurance

Is condo association insurance required?

While not always legally required, most lenders won’t approve mortgages without it. And most states expect condo associations to carry insurance.

Does condo association insurance cover unit interiors?

It depends on the association’s insuring agreement and the master policy. Some cover parts of unit interiors, some don’t. Always check your governing documents and master insurance policy to ensure they align.

Does location affect the price?

Absolutely! Living in an area prone to hurricanes, wildfires, or in high-crime areas can raise premiums.

How can owners protect themselves?

• Get personal HO-6 condo insurance.

• Read your association’s governing documents and master insurance policy carefully.

• Attend board meetings so you know what decisions are being made.

Condo association insurance helps to keep  everyone protected

In a nutshell:

Condo association insurance helps financially protect your building, common spaces, and shared responsibilities. It is recommended that condo boards review policies regularly, and educate owners on who is responsible for covering what.

Because let’s face it — it’s way easier (and cheaper) to sort out your coverage now than deal with nasty surprises after disaster strikes.

Need condo association insurance that’s simple, competitively priced, and actually makes sense?

Honeycomb Insurance offers custom coverage for condo associations with competitive rates, easy quoting, and smart underwriting powered by innovative AI technology.

Get a free quote today and protect your condo association with confidence.

Key takeaways

• Condo association insurance protects shared property and spaces.

• Unit owners still need their own personal condo insurance (HO-6).

• Reviewing the master policy every year is a smart move.

• Boards should consider D&O and crime coverage too.

• Good insurance helps keep your entire community financially safe.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal or insurance advice. Underwriting practices, tools, and criteria may vary by insurance carrier and are subject to change. The examples provided are not exhaustive and may not reflect the specific underwriting process used for your property. Honeycomb Insurance does not guarantee that addressing these items will result in coverage or favorable pricing. For guidance specific to your situation, please consult with a licensed insurance professional. This content is not intended to create, and receipt of it does not constitute, an insurance broker-client relationship.