A
Additional Insured
A person or organization (such as a property manager) added to an insurance policy who is afforded coverage under the policy terms.
Additional Living Expenses (ALE)
Coverage in an HO-6 policy that pays for temporary housing and living costs if a unit becomes uninhabitable due to a covered loss.
Agent of Record (AOR)
In insurance, AOR stands for Agent of Record, which is the individual or company officially authorized to represent the insured in managing, servicing, and purchasing their insurance coverage with a specific insurer. The AOR facilitates communication with the insurance company and can make decisions on behalf of the policyholder, often formalizing this relationship with an "agent of record letter".
Agreed Value
A valuation method where the insurer agrees to pay a predetermined value in the event of a total loss, rather than depreciated or replacement cost.
All-Inclusive Coverage (Single Entity or Walls-In)
A type of master policy that covers building interiors, including fixtures, finishes, and installations in individual units, often up to the original builder’s specifications.
All-Inclusive Coverage (Single Entity)
Also called "Walls-In" coverage, this type of master policy includes coverage for built-in property inside individual units, such as flooring, cabinetry, and sometimes appliances — but not personal property.
Appraisal Clause
A provision allowing either party to demand a third-party assessment when there is a dispute over the value of a property damage claim.
Assignment of Benefits (AOB)
Legal arrangement where a policyholder allows a third party (e.g., a contractor) to directly bill and collect from the insurance company. Can be a source of fraud if misused.
Association Policy (Master Policy)
An insurance policy purchased by the HOA or condominium association covering common elements, buildings, and liability exposures shared by all members.
B
Bare Walls Coverage
A type of master policy that covers only the basic structure of the building, such as exterior walls, the roof, and common areas. It excludes interior finishes within individual units (like cabinets, fixtures, and flooring).
Bare Walls Coverage (Studs-Out)
A type of master policy that only covers the structure and common areas, excluding everything inside the individual units such as cabinets, flooring, or interior walls.
Builder’s Risk Insurance
Covers buildings under construction or renovation against damage caused by fire, vandalism, weather, and other risks. Important for associations doing major capital projects.
Building Ordinance or Law Coverage
Provides coverage for increased construction costs due to building code upgrades required during repair or rebuilding. Especially important for older condo buildings.
Business Income Coverage
Also known as Business Interruption Insurance, this covers loss of income due to a covered peril — relevant for associations that rent common areas or have revenue streams.
C
Catastrophic Ground Cover Collapse
A specific type of ground movement, such as sinkholes, covered under certain state policies (e.g., in Florida).
Coinsurance Clause
A policy provision that requires the insured to carry a certain percentage of the property’s value in coverage. Failure to do so can result in reduced claim payments.
Commercial Package Policy (CPP)
A customizable policy that combines property, liability, and other coverages (like crime, D&O) into one package tailored for associations.
Common Area
Shared parts of the property managed by the association, such as hallways, roofs, elevators, parking lots, recreational facilities, etc. These are typically covered by the master policy.
Common Elements / Common Areas
Portions of a condo or HOA property shared by all owners (e.g., roofs, walls, clubhouses, stairwells, lawns). These are usually covered by the master policy.
Construction Defect
An issue stemming from faulty design, materials, or construction that may not be covered by insurance but could lead to litigation.
Contingent Liability
Covers potential liability the association may have indirectly — such as when hiring a contractor who doesn't have sufficient insurance.
Contractual Liability
Coverage for liability assumed through contracts, such as vendor or service agreements.
Crime & Fidelity Coverage
Protects the association’s funds from theft or fraud by employees, board members, or third parties.
Cyber Liability
Provides protection for data breaches, cyberattacks, and liability related to electronic records — increasingly relevant with digital HOA platforms.
D
Deductible Assessment
If a loss occurs in a common area and the master policy has a deductible, that amount may be assessed to all unit owners (or specific ones, depending on the cause of loss). Individual condo or HO-6 policies may help cover this (see Loss Assessment Coverage).
Directors and Officers (D&O) Liability
Covers board members and officers of the association for allegations of wrongdoing, such as, errors, omissions, or wrongful acts, while performing their duties and making decisions on behalf of the association.
E
Earthquake Insurance
Optional coverage for damage from seismic events, often excluded from standard property insurance. Associations in seismic-prone areas may need this policy.
Emergency Services Coverage
Coverage for necessary services like water extraction or board-up services immediately following a loss.
Equipment Breakdown Coverage
Covers repair or replacement of boilers, elevators, HVAC systems, and other essential equipment in common areas due to mechanical breakdown.
Equipment Floater
Covers movable equipment used by the HOA (e.g., lawn equipment, tools) that may not be included in standard property coverage.
Extended Replacement Cost
Provides additional funds above the policy limit to cover rising construction costs during rebuilding.
F
Fidelity Bond / Crime Insurance
Protects against embezzlement, fraud, or theft of association funds by employees, board members, or property managers.
Flood Insurance
Separate coverage for flood-related damage, typically required for properties in FEMA-designated flood zones. Available through NFIP or private insurers.
Flood Insurance (NFIP or Private)
Covers damage due to flooding, which is not covered under standard property insurance. Often required if the property is in a FEMA-designated flood zone.
Functional Replacement Cost
Covers the cost to replace damaged property with less expensive, functionally equivalent materials. Useful for older properties.
G
General Liability Insurance
Covers bodily injury or property damage occurring in common areas (e.g., someone slips by the pool). This is a core part of the association’s insurance package.
H
HO-6 Policy
A "condo owner's" policy purchased by individual unit owners. Covers the interior of the unit, personal property, personal liability, and often provides loss assessment and building coverage (in case of Bare Walls master policy).
HOA Insurance
Insurance purchased by the Homeowners Association to cover liability and property damage related to common areas. May include general liability, D&O, crime, umbrella, and more.
I
Improvements and Betterments
Upgrades or alterations made by unit owners to their units (e.g., granite countertops, wood flooring). Typically covered under the owner’s HO-6 policy unless the master policy is all-inclusive.
Indemnification
A legal obligation of the insurer (or one party) to compensate another for damage or loss under agreed terms.
Inflation Guard
An endorsement that automatically increases policy limits to keep up with inflation, ensuring adequate coverage over time.
Insurable Interest
Refers to the policyholder’s financial stake in the insured property. Associations have an insurable interest in common areas; owners in their units.
L
Loss Assessment Coverage
Part of a unit owner’s HO-6 policy that pays for the owner’s share of a loss assessment levied by the association due to a covered peril.
Loss Control
Measures taken to reduce the frequency or severity of losses (e.g., installing fire sprinklers or surveillance cameras).
Loss of Use
Pays for additional living expenses if a unit becomes uninhabitable due to a covered peril. Typically part of an HO-6 policy.
M
Market Value
The price a property would sell for on the open market. Different from replacement cost, which is used for insurance purposes.
N
Named Insured
The legal entity (e.g., HOA or condo association) listed on the master insurance policy that has contractual rights and responsibilities under the policy.
Named Perils vs. All-Risk (Open Perils)
- Named Perils: Only covers losses from specific risks listed in the policy (e.g., fire, windstorm).
- All-Risk: Covers all risks unless specifically excluded, offering broader protection.
Non-Owned Auto Liability
Covers liability for accidents caused by employees or volunteers using their personal vehicles on behalf of the association.
Notice of Cancellation
The formal notification that an insurance policy will be terminated, often requiring advance written notice to the association and sometimes to lenders.
O
Occurrence vs. Claims-Made Policies
- Occurrence: Covers incidents that happen during the policy period, regardless of when reported.
- Claims-Made: Covers claims reported during the policy period, regardless of when the incident happened.
Ordinance or Law Exclusion
A standard exclusion in many policies, requiring a separate endorsement to provide coverage for losses arising from code compliance during reconstruction.
P
Perils
Causes of loss covered by the policy (e.g., fire, wind, theft). "Named perils" list them specifically; "All-risk" covers all except those excluded.
Personal Injury Liability
Covers non-physical injuries like libel, slander, discrimination, or wrongful eviction — often included in D&O or umbrella policies.
Primary vs. Excess Insurance
- Primary: Pays first in the event of a claim.
- Excess: Pays only after primary coverage is exhausted (e.g., umbrella policies).
Professional Liability
Covers errors or omissions in professional services provided to the association (e.g., by the property manager or accountant).
Property Insurance (Commercial Property)
Covers the physical structures and shared property of the HOA/condo community. This is part of the master policy and applies to damage from fire, wind, vandalism, etc.
Property Manager Named Insured or Additional Insured
Property managers should be named on the master policy for liability protection while acting on behalf of the association.
R
Replacement Cost
Pays the cost to replace or repair property without deduction for depreciation, up to the policy limit. Important for both master and unit policies.
Replacement Cost Valuation
The cost to repair or replace the building without deduction for depreciation, often required by lenders and best for full recovery.
Replacement Cost vs. Actual Cash Value
- Replacement Cost: Pays for full replacement without depreciation.
- Actual Cash Value (ACV): Pays for replacement minus depreciation.
Reserves
Financial accounts held by the association for long-term repairs and replacements. Insurance does not cover reserve shortfalls.
Risk Management
Proactive practices to minimize potential losses, such as regular inspections, safety upgrades, and insurance reviews.
S
Self-Insured Retention (SIR)
Similar to a deductible, but applies to liability policies. The association pays this amount before the insurer pays on a liability claim.
Service Line Coverage
Pays to repair or replace damaged underground pipes or wiring (e.g., water, sewer, power lines) between the street and the building.
Severability of Interest Clause
Protects individual insureds under the same policy (e.g., unit owners or board members) from being penalized due to actions or negligence of others.
Special Assessment
An extra charge levied by the board on unit owners to cover unbudgeted expenses, such as large deductibles or uncovered repairs.
Subrogation
The insurer’s right to pursue a third party that caused an insurance loss to the policyholder. For example, if a contractor’s negligence caused a fire, the insurer may seek reimbursement from them.
U
Umbrella Liability Insurance
Provides higher limits of liability coverage beyond what’s included in the master general liability or D&O policies.
Unit Owner Add-Back Coverage
Optional HO-6 policy endorsement that allows a unit owner to "add back" coverage for parts of the building structure (like drywall, fixtures) that may not be covered under the master policy.
Unit Owner’s Policy (HO-6)
Covers the interior of the individual unit, personal belongings, personal liability, and loss assessments. Complements the master policy.
V
Vacancy or Unoccupied Clause
Limits or excludes coverage if units or common buildings are vacant for a specific period, increasing risk of undetected damage.
W
Waiver of Subrogation
Prevents the insurer from going after another insured party (e.g., a unit owner) for recovery, useful in reducing legal conflict within associations.
Water Backup Coverage
Optional coverage for damage from sewer, sump pump, or drain backups, which are typically excluded from base policies.
Wind/Hail Deductible
A separate, often higher deductible for claims resulting from windstorm or hail, common in high-risk regions.
Windstorm Coverage
Covers damage from wind-related events such as hurricanes or tornadoes. May have separate deductibles or exclusions in coastal areas.
Workers’ Compensation
Provides coverage for medical costs and lost wages if an employee of the HOA or contractor gets injured on the job.
DISCLAIMER: This website is designed to provide general education about insurance concepts and terminology. It is not intended to serve as legal or other professional insurance advice. While we strive to ensure the accuracy and relevance of the content presented, we make no guarantees regarding its completeness, timeliness, or applicability to specific situations. You are encouraged to consult with licensed insurance professionals and legal advisors for personalized guidance