Belong to a Homeowners' Association? Know Your Insurance Obligations
If you reside in a community that's part of a homeowners' association (HOA), you should understand what the association's insurance obligations are relative to your own.
If you don't carefully assess this dynamic, you could find yourself with a coverage gap if you assume that the association's insurance covers something it actually doesn't.
HOA rules usually require that all residents within the association's jurisdiction become members and pay a fee. Associations can create their own bylaws for the community or building, and sometimes hire an outside property management company in order to enforce maintenance and other standards.
The association's obligations will depend on the type of home you have:
A single-family, detached home
The HOA most likely only owns community amenities, such as:
- Recreational facilities, like a clubhouse, tennis courts, and parks,
- Gates to or inside the community, and
- Streets, if they are private.
The HOA owns the building and you own the property inside your condo. In that case, the association's insurance would cover:
- Main utilities running through the building,
- Elevators and stairwells,
- Garbage facilities, and
- The main lobby and hallways throughout the building.
Know who is responsible for what
Your goal should be to ensure you have no coverage gaps. Start by reviewing your association's bylaws.
This is why many HOAs require homeowners to maintain a minimum level of personal liability.
The Underinsured HOA
Sometimes HOAs don't carry enough insurance and members have to make up for the shortfall through assessments, which can be steep in the event of a significant loss.
For HOA members, insurers offer "loss assessment" coverage, which will pay your share if the association does not have sufficient insurance to cover a loss.