HOA insurance and your HO-6

Every owner in an association is covered by two policies at once, and most disputes after a loss come from not knowing where one ends and the other begins.

• The association’s master policy — bought by the association, paid for out of assessments, covering the common elements and, in most condominiums, the structure of the units to a level the declaration defines.
• Your HO-6 — bought by you, covering what the master policy does not: your personal property, your liability, loss of use, and typically the interior finishes and improvements the declaration makes your responsibility.

The line between them is drawn by the declaration, not by the insurer, and it varies. Some declarations insure the units as originally built, leaving improvements to the owner. Others are bare-walls, leaving everything inside the drywall to the owner. Reading which yours is, before a loss, is the single most useful ten minutes an owner can spend.

A certificate of insurance is not an insurance policy. It verifies and summarises the coverage an existing policy provides — that the association has an active policy, and what its limits and coverage types are.

It does not guarantee coverage and does not confirm that the policy is adequate. It is evidence that the policy exists and an outline of its key features.

Who asks for one, and why

Third parties: a lender before writing a mortgage on a unit, a contractor or vendor before working on the common areas, an escrow company during a sale. Requests go to the managing agent, who obtains it from the association’s broker.

Which policy responds depends on the governing documents, the terms of both policies, and the determination of what caused the damage. There is no universal rule, but the general shape is consistent.

The association’s policy

Generally responds to losses in the common elements, or that affect multiple units — damage to the roof, the exterior walls, a shared system, the structure.

Your HO-6

Generally responds to losses occurring within your unit, or caused by you, your household or your guests.

The deductible is the part people miss

If the association files a claim, its deductible applies — and on a master policy that deductible can be very large. The declaration decides who bears it: sometimes the association, sometimes the owner in whose unit the loss originated, sometimes allocated pro rata among affected units. Check that provision. An owner can insure against it: most HO-6 policies offer loss assessment coverage, which responds when the association charges its deductible or an uninsured loss back to the owners. It is usually inexpensive and it is routinely set far too low.

Insurance claims are the individual owner’s responsibility. The managing agent may assist with navigating the process, at an additional hourly cost if retained to do so.

Before you call

Review your policy so you know what is and is not covered, and what your deductible is. A claim below the deductible is a claim on your record for nothing.

Reporting

Contact your insurer as soon as possible. Have ready:

• Your policy number
• The date of loss
• A description of the damage or loss
• Photographs or other evidence of the damage

Then

Cooperate fully with the insurer’s investigation — this normally means allowing an adjuster to inspect and providing information on request. Keep detailed records of every communication: who you spoke to, when, and what was said. Take photographs before anything is cleaned up or removed.

Tell the association

If the damage involves or affects a common area, or was caused by another owner or by the tenant occupying your unit, notify the association and give them a copy of your claim. The association may have a claim of its own, and a delay in telling them can prejudice it.

An HO-6 covers only what the policy specifically covers, and limitations and exclusions apply. Read them before you need them.

A standard HO-6 is written for a unit occupied by its owner, or by a tenant on a long-term basis. Renting changes the risk, and a policy that has not been told about it may not respond.

• Long-term letting usually needs the policy endorsed for a tenant-occupied unit, and often a landlord liability element.
• Short-term letting — a vacation rental platform, or anything nightly — is a business activity. Many insurers exclude it outright. Some offer specialist short-term rental policies; others offer an endorsement to a standard HO-6.
• Failing to disclose the activity can result in a claim being denied. This is the failure mode: the cover was never in place, and the owner finds out at the claim.

Discuss your letting with your agent before the first tenant, not after the first loss. And check the association’s rental cap and approval requirements first — see the guide on renting out your unit.

• Does the dwelling or building-property limit match what the declaration actually makes you responsible for?
• Do you carry loss assessment coverage, and is the limit anywhere near the association’s master deductible?
• Is your liability limit sensible for the property, and does it need an umbrella?
• Does it cover loss of use — somewhere to live while a unit is repaired?
• If you let the unit at all, has your insurer been told, in writing?