Condo and Townhome Insurance: What an HO-6 Policy Covers and What Your HOA Covers

If you own a condo or a townhome, the building is often insured in part by your homeowners association (HOA), and the rest is up to you. Understanding where the association's coverage ends and yours begins helps you avoid gaps. This guide explains the common setup. Policies and association documents vary, so confirm the details for your property.

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Two Layers of Coverage

Condo ownership usually involves two policies working together:

• The association's master policy, which covers common areas and, depending on the policy, some or all of the building structure.
• Your own policy, often called an HO-6, which covers what the master policy does not.

How much falls on each depends on the type of master policy and the association's governing documents.

Types of Master Policies

Master policies are often described in one of these ways:

• Bare walls: covers the building structure but not what is inside your unit, such as fixtures, cabinets, and flooring.
• Single entity: covers the structure and the original fixtures and finishes in your unit, but usually not upgrades you added or your belongings.
• All-in: covers the structure, fixtures, and some improvements, though still not your personal property.

The terms are not used consistently, so read the actual policy and the association's declaration, bylaws, and rules.

What an HO-6 Typically Covers

• Interior improvements and finishes that the master policy does not cover
• Personal property, such as furniture, clothing, and electronics
• Personal liability if someone is hurt in your unit or you damage someone else's property
• Loss of use, which helps with living costs if you cannot stay in your unit after a covered loss
• Loss assessment coverage, which can help pay your share if the association levies a special assessment after a covered loss that exceeds the master policy

Loss Assessment Deserves Attention

If a covered loss exceeds the association's coverage, the association may bill owners for the shortfall. A policy with loss assessment coverage may help with your share, up to a limit. Ask what limit is available and whether it applies to deductibles the association must pay.

What About Townhomes?

Townhome arrangements vary. In some communities the HOA insures the exterior and common areas, and in others each owner insures the entire structure like a detached house. Check which applies to you. If you are responsible for the entire structure, you may need a standard homeowners policy rather than an HO-6. Our guide to what homeowners insurance covers explains the main coverages.

Questions to Ask Your HOA and Your Insurer

1. What does the master policy cover, and what are its limits and deductible?
2. Who is responsible for fixtures, flooring, and cabinets in my unit?
3. How are special assessments handled?
4. What loss assessment limit can I buy?
5. Does my lender require a certain level of coverage?

Lender Requirements

If you have a mortgage, the lender may require proof of both the master policy and your own coverage. Our guide for first-time buyers explains what to expect before closing.

Sources and Further Reading

• California Department of Insurance: Residential insurance guides
• Consumer Financial Protection Bureau: Owning a home