Condo Insurance (HO-6) and the Master Policy Gap
A condo owner's coverage starts where the association's master policy stops. Knowing which type of master policy you have, and how loss assessments work, prevents expensive surprises. Here is how the pieces fit.
Condo insurance is a two-policy system. The condo association carries a master policy on the building and common areas. Each owner carries an individual HO-6 policy for what the master policy doesn't cover. The gap between them is where condo owners get surprised, because master policies vary a lot and many owners never read theirs.
The short version
- The master policy covers the building and common areas. How much of your unit's interior it covers depends on the type of master policy.
- Your HO-6 policy covers your belongings, personal liability, loss of use, and the parts of your unit the master policy doesn't.
- Loss assessment coverage helps pay your share if the association charges owners for a covered loss, such as a large master policy deductible.
- Read the association's governing documents and master policy before choosing HO-6 limits.
Types of master policies
| Master policy type | Typically covers | What your HO-6 may need to cover |
|---|---|---|
| Bare walls | Structure and common areas; little or nothing inside the unit's walls | Interior walls, flooring, cabinets, fixtures, appliances, improvements |
| Single entity (original specifications) | Structure plus interior fixtures as originally built | Upgrades and improvements made since |
| All-in (all inclusive) | Structure plus interior fixtures, including many improvements | Belongings and liability; less building coverage needed |
Terminology varies, and the association's bylaws and the master policy define who covers what. Ask the association or property manager for a copy of the master policy declarations and the insurance section of the governing documents.
What an HO-6 policy covers
- Dwelling (Coverage A): the parts of the unit you're responsible for, such as interior walls, floors, fixtures, and improvements.
- Personal property: your belongings.
- Personal liability: injuries or damage you cause to others, including inside your unit.
- Loss of use: extra living costs if your unit is unlivable after a covered loss.
- Loss assessment: your share of certain association assessments.
Loss assessments: the overlooked risk
When the association has a covered loss, it may assess owners for amounts the master policy doesn't pay, most commonly the master policy deductible. Large deductibles, especially percentage deductibles for wind or earthquake, can lead to large assessments.
A hypothetical example: a storm causes damage to a 40-unit building. The master policy has a $200,000 wind deductible, which the association divides among owners.
| HO-6 loss assessment limit | Owner pays out of pocket |
|---|---|
| $1,000 | $4,000 |
| $5,000 | $0 |
| $25,000 | $0 |
Show the numbers behind this chart
| Owner pays | |
|---|---|
| $1,000 loss assessment coverage | $4,000 |
| $5,000 coverage | $0 |
| $25,000 coverage | $0 |
Many HO-6 policies include a small amount of loss assessment coverage by default, and higher limits are often available. Some policies limit how much of an assessment for a master deductible they'll pay. Check the specific wording.
Assessments for things like deferred maintenance or capital improvements aren't insurance losses and generally aren't covered.
Water damage between units
Water damage in condos often crosses unit lines. A leak in one unit can damage units below. Who pays depends on the governing documents, the master policy, the cause, and negligence. Your HO-6 liability coverage may respond if you're responsible for damage to a neighbor's unit or common areas. See water damage claims.
Choosing HO-6 limits
- Get the master policy type and deductibles.
- Estimate the cost to replace the interior items you're responsible for, including improvements.
- Inventory your belongings; see home inventory.
- Set loss assessment coverage with the master deductible in mind.
- Choose liability limits that fit your assets; see liability limits.
- Ask about water backup and other endorsements.
The takeaway
Condo coverage is split between the association's master policy and your HO-6. Find out what type of master policy your building has and how large its deductibles are, then set your HO-6 dwelling, belongings, liability, and loss assessment limits to fill the gaps.
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