Alabama condo insurance: Costs, coverages, and requirements

What is Alabama condo insurance?

Alabama condo insurance is generally divided between the condominium association’s master policy and the individual unit owner’s HO-6 policy.

The master policy protects association property and shared risks. An HO-6 policy fills important gaps by covering the parts of the unit the owner is responsible for, along with belongings, personal liability, and certain expenses after a covered loss.
 

Master insurance policies

The association’s master policy is designed to insure the condominium building, common elements, shared systems, and certain liabilities. The exact scope depends on the policy and the responsibilities established by the declaration and bylaws. The master policy is typically funded through Alabama condo fees.

FS Insurance Brokers, a licensed insurance agency and an affiliate of FirstService Residential, helps condo associations in Alabama by combining insurance expertise with property management insight to help board members review coverage, identify potential gaps, evaluate deductibles, and explore options.

Any coverage is offered, placed, and bound only through licensed insurers and their appointed producers, and this guide does not itself offer or bind coverage. FS Insurance Brokers helps boards make informed decisions that better reflect the community’s needs.
 

HO-6 policies

Alabama condo owners often carry an HO-6 policy to cover permanently installed property inside the unit that is not covered by the association’s policy. Coverage may also include personal property, personal liability, loss of use, and medical payments to others. Optional protections may include loss assessment and water backup coverage.

As a general matter of industry practice, homeowners policies modified for condominium unit owners commonly include property, living-expense, liability, and medical-payments coverage.
 

Are condo associations in Alabama required to have condo insurance?

If the Alabama Uniform Condominium Act applies to your community, the association is generally required to carry reasonably available property insurance on the common elements and liability insurance for risks connected to their use, ownership, or community maintenance.

For buildings with horizontal unit boundaries, the association’s property policy must generally include the units but does not have to cover improvements installed by owners. The declaration may require additional insurance (Ala. Code § 35-8A-313).
 

Are unit owners required to have condo insurance in Alabama?

Alabama condo law does not generally require individual owners to carry an HO-6 policy. However, the association’s governing documents or the owner’s mortgage lender often require coverage.

Even when it is optional, an HO-6 policy can protect personal belongings, interior finishes, personal liability, and temporary living expenses after a covered loss.
 

What do HO-6 coverage letters mean?

A typical Alabama HO-6 policy is divided into coverage categories. Names and limits can vary by carrier, so owners should review the actual policy:

• Coverage A — Dwelling: Covers eligible interior features and improvements that are the owner’s responsibility, such as flooring, cabinets, built-in appliances, and certain wall finishes.
   
• Coverage C — Personal property: Covers belongings such as furniture, clothing, electronics, and household items after a covered loss, subject to policy limits and exclusions.
   
• Coverage D — Loss of use: Helps pay additional living expenses when a covered loss leaves the condo temporarily uninhabitable.
   
• Coverage E — Personal liability: Helps with covered legal and settlement costs when the owner is responsible for injury to another person or damage to someone else’s property.
   
• Coverage F — Medical payments to others: May pay limited medical expenses when a guest is injured, regardless of fault.

The factors behind rising community association insurance costs

Natural disasters

Many factors drive insurance costs, but to understand where we are today, we need to take a step back and examine what has happened over the past few years. In years past, multiple insurance carriers were available in the marketplace, and rates were low, making it a great time to shop for insurance.

During this period, some associations were able to reduce their insurance premiums meaningfully — reductions on the order of 40% or 50% are cited only as illustrative examples of what was sometimes achievable in especially favorable conditions, not as typical or guaranteed results, and actual outcomes varied widely by community, building, and market.

The market began to change, however, as major hurricanes struck the Gulf Coast and Southeastern United States, causing billions of dollars in damages. Storms that make landfall along the Alabama and neighboring Gulf coast bring this pressure close to home for Alabama communities. Soon after major storm seasons, insurance companies began to see an increasing number of claims, and the associated costs of these and other disaster-related claims are passed on to consumers.
 

Supply and demand

The number of insurers is no longer abundant, yet the demand for insurance continues to rise. This lack of supply, coupled with growing demand, has led to some remaining carriers raising their rates or limiting the amount of insurance they are willing to offer.
 

Collapse of the Champlain Towers South in Surfside

Although property insurance premiums were on the rise before the 2021 collapse of Champlain Towers South in Surfside, Florida, the tragedy increased scrutiny of aging condominium buildings nationwide and contributed to tighter underwriting.

For Alabama associations — especially older buildings along the Gulf Coast — this has meant closer attention to structural condition, reserve funding, and engineering reports at renewal. The settlement, widely reported at roughly $1 billion, highlighted the scale of potential liability.
 

An overall increase in property values

Insurance carriers provide appraisals based on the cost of construction materials like steel and lumber. Factors like inflation have caused the cost of these materials to increase, leading to higher property values. The higher the property value, the higher the insurance premium.
 

Types of policies being affected

"Rates are increasing across the board for condo and community associations. Property, general liability, and umbrella coverage rates are all increasing, with some carriers even adding separate wind deductibles."

Josh Williams, director of insurance at FirstService Residential

Carriers have also become more selective about who they will insure, with some requiring full engineering reports before providing the association with a quote.
 

Tips for making your community more marketable to insurance carriers

As underwriting has become more restrictive, what can you do as a board member to make your community more attractive to insurance carriers?

1. Stay connected.

   The first thing you can do is stay in close touch with your insurance agent. They are the ones who have the specifics about the history of your building or community and will be your best resource for information and strategies to control premiums. You should also learn from them what information is needed to receive a quote.
   
   Board members should contact their insurance agent months in advance to understand the conditions and requirements from carriers to secure quotes for their community. Some carriers won't provide a quote until specific documents are provided, so being proactive, asking questions, and having regular conversations with your agent well in advance is important.
    

2. Find out if your property needs a new appraisal.

   Rebuilding costs have increased significantly in recent years, so your property may need a new appraisal, especially if it has been a while. Also, carefully check the details on past appraisals, particularly the square footage.
   
   If the listed square footage is higher than the actual square footage, that will result in a higher insured valuation for the property and a higher premium. Therefore, it might be a good idea to start from scratch by getting an inspection and then a new appraisal.
    

3. Maintain a record of all building updates.

   Carriers will want to know about any updates or changes to your property. Even minor roof, electrical, or plumbing updates should be noted. If you've installed impact glass or shutters, you'll also want to share this information with your agent.
   
   Agents are responsible for presenting your association in the best light to the insurer, providing it with the information it needs to feel comfortable insuring your property.

Budgeting for higher premiums

"Since property insurance is a major budget item, I recommend that our boards begin the research process during the budget planning phase, which typically starts in July. Property insurance can be a complex buy and is a large business decision for associations, so it’s important to give your board enough time to understand it clearly."

Keith Sensabaugh, vice president at FirstService Residential

Insurance underwriters require a lot of information, and it can take some time to prepare a quote. And because there are a limited number of carriers in the market handling numerous quotes and renewals, the bidding and quoting process can take much longer than expected.

Getting started early — at least 150 days before your policy's renewal date — will give your board enough time to receive a quote, so it isn't scrambling at the last minute.

When budgeting for premiums, if your association finds that it lacks the cash it needs to pay for them, consider alternative financing options. Opening a line of credit or securing a loan may be options you want to explore.

As a matter of common budgeting practice, associations typically fund property insurance premiums as a recurring operating expense rather than drawing on reserves, which are generally set aside for capital repairs and replacements.

The Alabama Uniform Condominium Act does not itself prohibit an association from applying reserves toward insurance costs; how insurance is funded is generally governed by the association's declaration and bylaws and by the board's annual budget. Consult your association's attorney about your community's specific circumstances and governing documents.
 

About FirstService Residential

FirstService Residential supports Alabama communities with local expertise backed by national resources. Our teams help boards stay organized with governance support, recordkeeping, financial management, vendor coordination, resident communication, and 24/7 customer care.

We help boards apply consistent processes that align with their governing documents and Alabama law, so board members can stay focused on long-term community goals instead of day-to-day administration.

Contact a member of our team today to learn more.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.