Condo Unit Owners Insurance, commonly known as an HO-6 policy, is designed to cover the gaps left by your HOA’s master insurance policy. More and more Homeowners Associations are requiring unit owners to carry their own HO-6 policy to protect the interior of their unit, upgrades, personal belongings, liability, and even special assessments.
When you pay your monthly HOA dues, a portion goes toward the association’s master policy. This policy typically covers the building’s exterior and shared common areas, as defined in the association’s CC&Rs (Covenants, Conditions, and Restrictions). However, every HOA is different. Some master policies are “all-inclusive” and cover parts of the interior, while others are “walls-out” or “exterior-only,” placing more responsibility on the unit owner.
That’s where an HO-6 policy becomes essential. It helps ensure you’re properly protected where the master policy stops.
What Does an HO-6 Policy Cover?
An HO-6 policy can provide protection for both owner-occupied and rental condos or townhomes, including:
• Interior building coverage: cabinets, flooring, fixtures, and improvements
• Personal property: furniture, clothing, electronics, and appliances
• Liability protection: for both owner-occupants and landlords
• Loss of rents: for rental properties
• Loss assessment: coverage for your share of certain assessments related to covered losses
Why Is Loss Assessment Coverage So Important?
One of the biggest trends in HOA insurance today is higher deductibles on master policies. For example, a policy with $20 million in coverage and a 5% deductible results in a $1 million out-of-pocket expense for the association.
Many HOAs do not have sufficient reserves to cover this, which means the cost is often passed down to unit owners.
In Colorado, this scenario commonly occurs after hailstorms. If the HOA assesses each owner for their share of the deductible, your HO-6 policy’s loss assessment coverage may help cover some or all of that cost. In other words, it transfers a potentially significant financial burden away from you.
When Does Loss Assessment Not Apply?
It’s important to understand that loss assessment coverage only applies to assessments resulting from a covered insurance loss (such as hail, fire, or wind damage). It typically does not apply to:
• Routine maintenance or repairs, such as sidewalk or pavement upkeep
• Improvements or upgrades to common areas
• Reserve shortfalls or budget deficits
• Assessments not related to a covered claim under the master policy
For example, if the HOA charges unit owners for sidewalk maintenance or general repairs, that cost would not be covered by your HO-6 policy.
How Much Coverage Should You Carry?
It’s important to align your loss assessment coverage with your HOA’s potential deductible exposure. If your current policy limit is too low, ask your agent about increasing it. Not all carriers offer higher limits, so it may be worth exploring other options to ensure adequate protection.
Final Thoughts
Insurance policies come with limitations, exclusions, and conditions. Relying solely on your HOA’s master policy can leave you underinsured and vulnerable to unexpected expenses. An HO-6 policy helps close those gaps, protecting your home, your belongings, and your finances.
The good news is that HO-6 policies are generally very affordable, with average premiums around $550 per year.
If you have questions about your coverage, your HOA’s CC&Rs, or the master policy, I’m happy to help review your options and make sure you’re fully protected.
