HOA insurance: Understanding costs and coverage

Wednesday October 15, 2025

Homeowner's associations (HOAs) have many responsibilities that can be difficult to keep up with. One of the main ones is selecting community association insurance. HOA’s should carefully consider the type and extent of coverage they purchase from an insurance provider. The right policy can help protect your investment while minimizing risk.

Factors like what kind of coverage your community association insurance master insurance policy outlines, costs, and annual assessments should be considered when reviewing your HOA policy. This article will explore insurance for homeowners associations and help you understand how the right policy and HOA insurance coverage can help protect your community.

What is HOA insurance?

What does HOA insurance cover?

HOA or community association insurance refers to a type of insurance policy that is typically purchased by a homeowners association to protect the common areas and shared assets within a condominium complex, planned community, or residential development. HOAs are responsible for managing and maintaining these common areas, and community association insurance is crucial to mitigating financial risks associated with potential damages, liabilities, and legal issues.

For example, if a tree in a shared green space falls and damages several park benches, HOA insurance can help cover the cost of repairs or replacement. If someone slips and falls at the community pool or in the clubhouse, liability coverage within the policy can help manage medical expenses or legal fees.

Additionally, in the event of vandalism to shared property like entry gates or community signage, insurance can assist with restoration costs. These practical protections allow the HOA to respond efficiently to unforeseen incidents os the community remains safe and well-maintained without major financial setbacks.

Here’s a list of what HOA insurance covers specifically:

Property Insurance: Property insurance typically covers damage or loss to the common areas and structures owned and maintained by the association. This can include the clubhouse, swimming pool, playgrounds, landscaping, and parking lots.
Liability Insurance: This provides liability protection coverage for bodily injury or property damage claims that may occur in the common areas. For example, if a visitor slips and falls by the pool or if a tree in a common area falls and damages a resident's car, this coverage can help protect the HOA from lawsuits.
Directors and Officers Liability Insurance: D&O insurance protects HOA board members and officers from personal liability if they are sued for decisions or actions taken on behalf of the association.
Fidelity Bond: This type of coverage helps protect the association from financial losses resulting from dishonest acts by employees or board members, such as embezzlement or theft of association funds.
Workers' Compensation: If the HOA has employees, workers' compensation insurance may be necessary to cover medical expenses and lost wages for employees who are injured while performing their job duties.
Equipment and Property Coverage: This can include protection for equipment used to maintain common areas, such as lawnmowers, tools, and other machinery.
Ordinance or Law Coverage: This insurance covers costs related to bringing the common areas into compliance with updated building codes or laws if these areas are damaged and require repairs or rebuilding.

It's important to note that while community association insurance covers common areas and shared assets, individual homeowners are usually responsible for insuring their own units or dwellings. Homeowners are encouraged to purchase their own insurance, often called HO-6 policies, to protect personal property and provide personal liability coverage for their units.

Because specific coverages and limitations can vary, both board members and residents should carefully review their policies and consult with experienced HOA insurance professionals to acquire adequate protection for their community’s unique needs.

How much should HOA insurance cost?

Determining how much HOA insurance should cost depends on several important factors, including the location of the community, the total value of covered assets, the type and scope of coverage selected, and the association’s claims history. On average, HOA insurance premiums can range from $2,000 to $10,000 per year, although these figures may vary widely based on the specifics of the property and location. For larger or high-value communities, annual premiums can exceed $20,000.

Premiums for HOA insurance policies tend to reflect the level of exposure to risks such as natural disasters, vandalism, or liability claims, and costs will often be higher in regions prone to severe weather or in communities with expensive shared amenities. For example, properties located in hurricane-prone areas like South Florida or wildfire zones like California may see significantly higher premiums due to the increased risk. Similarly, the presence of pools, gyms, or clubhouses can drive up costs due to heightened liability exposure.

Board members and property managers should obtain quotes from multiple reputable partners like FS Insurance Brokers, thoroughly compare policy terms, and carefully assess both deductibles and premium structures.

First-party vs. third-party coverage

There are two kinds of coverage for HOA communities: first-party and third-party. First-party insurance covers the policyholder's losses, and they can file a first-party claim against their insurance policy. For example, if a severe thunderstorm damages the clubhouse roof or if a burst pipe floods the association’s gym, the association would file a first-party claim for these damages. Another example is when a fire destroys outdoor amenities, such as the playground or swimming pool area, and the association seeks compensation under its insurance policy.

Third-party coverage protects an association from litigation brought forth by another entity. For instance, if a resident trips over a loose tile in the community walkway and sustains an injury, resulting in a lawsuit against the association for medical expenses, this would be handled as a third-party claim. Similarly, if a guest's car is damaged due to a fallen tree on community property and the guest takes legal action, the association’s third-party insurance would respond.

Insurance for homeowner associations generally includes several types of first-party and third-party policies. The community’s policies protect building exteriors, structures, shared spaces, furnishings, and people like board members and community employees. For example, coverage may include protection for the community’s recreation center furniture, insurance for landscape damage after a storm, and liability protection for board members when making official decisions on behalf of the association.

What is the master insurance policy for a homeowner association?

The community’s master policies can provide coverage that protects several areas of the property as mentioned above as well as some of the following:

Bare walls: This coverage includes basics like roofs, exterior floors, elevators, and exterior walls. Residents must cover things inside their units, like flooring, fixtures, furnishings, and large appliances. Bare walls coverage excludes residents’ personal property.
Single entity: This coverage includes basic elements like roofs, exterior floors, elevators, and exterior walls. It also covers some fixtures, standard finishes, and general appliances. Much like bare walls coverage, single entity coverage excludes residents' personal property.
All-In: This comprehensive coverage protects elements like roofs, exterior floors, elevators, and exterior walls, as well as fixtures, additions, installations, and improvements inside the units. It does not, however, cover personal property.
Commercial auto: This coverage covers comprehensive and collision damage involving service vehicles owned, rented, or borrowed by the association.
Umbrella coverage: Provides extra coverage limits beyond liability and limits on policies like general liability coverage, commercial auto, and directors and officers.

Exclusions and supplemental coverage

The role of an HOA's master policy is to provide coverage for the community in case something happens. However, there could be several exclusions that could affect homeowners. Becoming familiar with the exclusions under an HOA master policy makes it easier for boards to communicate coverage to homeowners. In turn, boards can help residents navigate home insurance policies to obtain coverage for things not addressed by their insurance.

"Owners should know what the association’s policy covers so they can get a corresponding policy that ensures complete protection without any gaps in coverage. It should be a dynamic relationship."

Jamie George, vice president of insurance at FirstService Financial

What's not covered by HOA liability insurance?

While HOA insurance covers a variety of risks, it's important to recognize that not every situation or loss will be insured. Common exclusions may include:

Individual unit owner property: Insurance typically does not extend to damage or losses to a homeowner’s individual unit, interior fixtures, or personal belongings.
Wear and tear: Gradual deterioration, maintenance issues, and normal aging of buildings or amenities are generally not covered.
Flood and earthquake damage: Standard policies often exclude natural disasters like floods or earthquakes, which usually require separate policies.
Intentional acts: Damages caused intentionally by residents, board members, or employees are not covered.
Certain types of water damage: Some policies exclude water damage from sources like sewer backups, unless special endorsements are added.

Learn more about how FirstService Financial can support your community.

What are the HOA insurance requirements?

HOA insurance requirements are usually set by state laws, lender rules, and the association’s governing documents (like CC&Rs and bylaws). While the details can vary, most HOAs are required to carry:

Property insurance to protect common areas like clubhouses, pools, and landscaping.
General liability insurance to cover accidents or injuries in shared spaces.
Directors and officers (D&O) liability insurance to protect board members from personal liability related to their decisions.
Fidelity bonds or crime insurance in many states to safeguard community funds from theft or fraud. For example, some states mandate minimum coverage limits for property and liability insurance, while others require HOAs to carry additional protections like workers’ compensation. Mortgage lenders also typically require proof of HOA insurance before approving home loans, which helps protect property values and help provide financial security for the entire community.

Because requirements differ by state and lender, HOA boards should review their insurance policies each year with legal counsel or insurance professionals to confirm compliance and avoid costly coverage gaps.

Step-by-step guidance for policy selection

Speak to a professional: Consult with an insurance agent, broker, or legal counsel who has expertise in HOA and property insurance, like FS Insurance Brokers. These professionals can help interpret policy language, clarify the association’s specific coverage needs, and identify potential gaps or overlaps in protection. They can also provide guidance on navigating state laws, lender requirements, and the association’s governing documents to review for compliance.
Assess coverage needs: Determine the type of property or liability you want to insure. For instance, homeowners may consider policies that extend protection beyond fire and theft to include coverage for natural disasters specific to their location. Renters, on the other hand, should prioritize securing their personal possessions.
Compare policy features and exclusions: Review and compare the coverage limits, exclusions, and special provisions of various insurance options. Pay attention to what each policy does not cover to avoid gaps in protection. If you possess valuable assets like fine art, seek specialized coverage with enhanced limits and requirements for professional appraisals.
Evaluate costs and insurer reputation: Examine premium rates, deductibles, and any additional costs associated with the policy. Investigate the insurer’s reputation for customer service and claims processing, as working with a reliable provider is crucial when you need support.
Tailor solutions for associations: Associations should consider the unique needs of their operations. A small retail shop might benefit from a bundled policy that includes both property and liability protection, while a contractor may need focused coverage for workplace incidents or equipment.

What happens if an HOA doesn't have insurance?

Without insurance, an HOA is exposed to a wide range of serious financial and legal risks that could ultimately threaten the stability and value of the entire community. If a significant event such as a fire, natural disaster, or major accident occurs in a common area, the costs of repairs, legal claims, or injury settlements would have to be paid directly by the association, and this can leading to steep special assessments or emergency increases in dues for homeowners.

The absence of coverage for directors and officers exposes board members to personal liability for decisions made on behalf of the HOA, which may discourage qualified individuals from serving and undermine effective community governance. Without proper liability insurance, the HOA is also left vulnerable to lawsuits arising from incidents in shared amenities, which may result in extensive litigation costs and damage to the association's reputation.

Lenders and mortgage providers typically require adequate HOA insurance as a condition for approving home loans, so a lack of coverage can hamper the ability of residents to sell or refinance their units.

Mandatory vs. optional HOA insurance coverage

When evaluating HOA insurance policies, it’s important to distinguish between mandatory and optional coverages to review for both regulatory compliance and sufficient risk mitigation for the community.

Mandatory coverages are typically dictated by state laws, governing documents, and mortgage lender requirements. These often include property insurance to protect common areas, general liability coverage for accidents occurring in shared spaces, and directors and officers (D&O) liability to protect board members from personal liability related to their decisions. Fidelity bonds or crime insurance are also frequently required to help minimize the risk of financial losses due to fraud or theft of association funds.
Optional coverages, on the other hand, allow associations to address specific vulnerabilities that may not be covered by baseline requirements but are nevertheless vital for comprehensive risk management. Examples of these elective policies include earthquake and flood insurance (especially important in regions prone to such natural disasters) equipment breakdown coverage for community-maintained mechanical systems, cyber liability insurance to protect sensitive resident data, and umbrella policies that extend liability protection beyond standard limits. An association might also consider ordinance or law coverage, which handles the additional costs imposed by building code upgrades after a covered loss.

Watch the video below to learn strategies for securing the best terms in your coverage packages, more information on rising insurance premiums, and implementing effective risk management practices for your property.

Annual HOA insurance review

Community associations should conduct annual insurance reviews to assess what new coverage might be needed or outdated. This is essential for measuring costs and limiting risk since different types of policies apply within a property's boundaries. Communities are constantly evolving, so an association must keep up with all these changes!

Since most policies renew yearly, it is an excellent opportunity to have a professional assess and advise what new coverage is needed. An annual HOA insurance review can be conducted by either an agent or broker and is especially important if the property has undergone extensive improvements or renovations or has a new asset, like a gym area or pool.

The annual review is also crucial if a community has partnered with a property management company within the last year. A property management company may require specific coverage to protect the property, so it is best to review this annually for compliance.

Risk and risk management

When considering a new policy or renewing your community coverage, it is essential to help minimize risk. Risk can be reduced by partnering with a property management company that has experience in managing HOAs and negotiating better rates and coverage.

FirstService Residential can help your association navigate homeowners association (HOA) insurance and find the right coverage for your community through our affiliate FS Insurance Brokers. Exclusively available to FirstService Residential communities, it's one of the ways we continue to add additional value and solutions for the communities we serve.

As boards often face tough choices while balancing coverage, risk, and budgets, FirstService Financial's team of experts understands these realities and works directly with boards to simplify these complex decisions. For example, FS Insurance Brokers recently assisted a developer-controlled community in Hoschton, Georgia, in securing a $5 million umbrella policy, delivering robust protection and supporting the property's long-term value.

Want to learn more? Contact a member of our team and see how we can support your community’s vision.

View More Articles