HOA Insurance & It’s Limitations

If you ask most people who’ve owned or own a condo that had a water loss caused by a roof leak, stucco issue, leak from a unit above or any other type of damage not related to plumbing what it’s like to deal with their insurance and the condo board, you may unanimously hear about a back and forth nightmare lasting months to years. Homeowner Associations, HOAs, get hazard and liability insurance for certain areas of condominium projects. However, home owners must understand what HOA insurance covers and what it does not protect. Usually, HOA insurance covers common areas and, often, the exterior elements, such as roofs, of condo units. HOA insurance seldom protects interior components of units, such as walls, any household goods or personal property from certain and sometimes all water damage and resulting mold growth from that initial damage. Should the complex have amenities, such as a pool and clubhouse, HOA insurance typically covers these features.

Depending on the type of condominium project, common areas can be vast or quite small. For example, high-rise condo buildings often have limited common areas, such as lobbies. Conversely, townhouse condominiums may have bike trails, pools, tennis courts, parks and open land. Most HOA insurance policies cover liability issues for home owners should losses occur in the common areas.

HOA insurance does not cover the interior of condominium units. Home owners must get condo insurance that protects interior components, such as walls, floors and ceilings of their units, along with personal property. HOA insurance typically protects home owners for liability or hazard losses in common areas, but not any personal injuries, negligence or hazard losses inside condominium units. Should the condo project, or building, suffer hazard losses, HOA insurance does not cover damage to the interior of condo units. Home owners must examine their HOA master insurance policy before buying their personal coverage. Never assume that HOA insurance protects all issues outside of your unit and common areas. The HOA can purchase coverage that it believes sufficient, but not necessarily cover some important hazards. Get a copy of your HOA master insurance policy and read it. If necessary, have your insurance adviser translate confusing language. Then purchase home owner insurance that covers perils that the HOA master policy does not such as water losses within the unit and a rider for mold damage caused by the initial water loss since mold removal isn’t covered as a stand alone on any policy.

The type of coverage your HOA buys is as important as the scope of the protection. Common area coverage is critical to the value of your own unit, as your resale price will be affected by the condition of lobbies, open space, pools and other amenities. Actual cash value is the least expensive coverage, as payments are based on replacement cost less depreciation and possible excessive usage. Replacement cost is better, but may be subject to stated maximum dollar amounts. Guaranteed replacement cost is the best coverage, with no maximum limits and will restore damaged areas to former conditions.

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