Tuesday September 16, 2025
What is condo insurance?
Condo insurance for associations, also called a master policy, covers the shared property and common elements in a condominium community. In Minnesota, these policies are held by the condo association and are separate from the individual insurance policies unit owners may purchase for personal belongings or upgrades. The association’s condo insurance typically covers building exteriors, shared areas like lobbies and hallways, and common systems such as plumbing and electrical infrastructure. The scope of coverage depends on the policy type, the condo’s governing documents, and any requirements under the Minnesota Common Interest Ownership Act (MCIOA).
Condo insurance policies can be written as bare walls, single entity, or all-in coverage. A bare walls policy covers the structure and common areas but excludes most interior components of the units. A single entity policy adds coverage for original fixtures, such as standard cabinets or flooring installed by the developer. An all-in policy may include both original and upgraded interior finishes, depending on how the policy is structured. Condo boards should work with licensed insurance professionals to review their governing documents and select the coverage that best aligns with their legal obligations and community needs.This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.
What is HOA insurance?
HOA insurance in Minnesota refers to the master policy carried by a homeowners association. Like a condo policy, it protects shared elements, but the specifics can vary based on the type of community and how ownership is structured. In traditional single-family home communities, the HOA’s master policy often covers community amenities such as parks, clubhouses, signage, and private roads, but not the homes themselves. In townhome-style HOAs, the policy might also cover building exteriors, roofs, or shared walls, depending on what’s outlined in the association’s governing documents.Common coverages
Minnesota condo insurance and HOA policies often include several core types of coverage, though the details may vary based on the community’s structure and governing documents:Property insurance
Property insurance covers buildings, contents, rents, or property of others in your possession from perils like fire, water damage, and theft. The state of Minnesota has the largest volume of townhomes and condominiums located in the seven-county metro. It's essential that you have the right kind of coverage. Minnesota is now considered a catastrophic state due to the large volume of wind & hailstorms that occur annually.Commercial general liability insurance
Commercial general liability insurance protects a business from financial loss should it be liable for property damage or personal injury caused by provided services, business operations or employees. It also covers any third-party mishaps, such as bodily injury due to slipping/falling and property damage, or damage to someone else's property.Directors and officers (D&O) liability insurance
Directors and officers liability insurance covers the board of directors for legal action or claims brought against them from causes of loss such as breach of fiduciary or legal duty while serving on a board or as an officer. Some of the most common types of claims are a breach of fiduciary duty, failure to adhere to or enforce policies, discrimination of any kind, HUD/FHA-related claims, emotional support animals, challenges to the election process, architectural review decisions, and employment practices liability. These claims can be monetary (for example, if the board decided to use a specific community association vendor and broke the contract) or non-monetary (for example, if a homeowner disputes the election process and demands a new election).Review your insurance applications closely and keep records of any board decisions in writing and as part of the board's meeting minutes. Next, immediately notify your insurance company of a claim or potential claim. Lastly, READ your community bylaws and declarations to understand your duties as a board member.
Crime (aka fidelity) insurance
Fidelity insurance covers losses due to criminal acts such as fraud or theft by employees, directors, principals, partners, or anyone else colluding with an employee. The loss can be of savings or goods and the coverage may be required in respect of one employee or a group of employees. Fannie Mae and the Federal Housing Administration (FHA) require an Employee Dishonesty limit equal to or greater than 100% reserve funds plus three months of operating income to cover.Excess liability and umbrella insurance
Most people think excess liability and umbrella insurance are the same, but they are different types of coverages. Excess liability insurance provides additional coverage for one of your liability insurance policies, typically general liability insurance. Commercial umbrella insurance for your HOA provides additional coverage for several of your liability insurance policies. It offers higher liability limits and coverage, whereas your underlying policy may not and kicks in when one of the underlying policies reaches its limit.Workers’ compensation
Workers’ compensation insurance protects associations from potential liability if someone performing work for the community is injured. While it’s most commonly associated with employee claims, it can also help fill coverage gaps when uninsured contractors or volunteers are hurt on association property. Even if your HOA or condo corporation doesn’t have direct employees, many experts recommend carrying a workers’ compensation policy. This coverage can respond to certain injury claims brought by vendors whose own policies have lapsed or weren’t properly in place — as well as by volunteers acting on behalf of the board. It’s one more way to help protect your community from unexpected costs or disputes.Flood and earthquake insurance
Most people assume they have flood and earthquake coverage and only find out that they don't once it's too late. It is excluded from most policies unless you know to ask for it. Do you need it, living in Minnesota? If you think Minnesota doesn't have earthquakes, think again. Minnesota had 11 earthquakes of magnitude 2.0 or above in 2024. Minnesota is also prone to flooding during the spring and summer months. Simply put, flood and earthquake coverage is more necessary for your Minnesota condo, townhome or HOA than you might think.Insurance requirements for condos and HOAs in Minnesota
For communities governed by MCIOA, Minnesota law sets minimum requirements for HOA and condo insurance. These include:- Property insurance covering full replacement cost of common elements and units (depending on the type of policy adopted)
- Commercial general liability insurance
- Disclosure of the master policy to owners and mortgage holders
Common costs for HOA and condo insurance
Most associations in Minnesota dedicate between 20% and 30% of their annual operating budget to insurance premiums. This percentage can increase when premiums spike or when the association carries lower deductibles. Boards typically budget for insurance as part of annual dues and may need to adjust assessments to cover increases. Working with a broker who specializes in community associations can help boards assess risk, compare carriers, and identify cost-saving strategies without leaving the property underinsured.Actual cash value
Actual cash value (ACV) is the amount your insurance carrier will pay after subtracting depreciation from the replacement cost. In other words, it reflects what the damaged property was worth at the time of the loss — not what it costs to replace today. For example, if a hailstorm damages your HOA’s roofs and the cost to fully replace them is $1,000,000, but the roofs are 15 years old, the payout under an ACV policy could be significantly less. That depreciation gap can become a major budget consideration if your policy doesn’t offer replacement cost coverage.| | Actual Cash Value | Replacement Cost |
| Cost to Replace Roof | $1,000,000 | $1,000,000 |
| Actual Cash Value | $600,000 | $600,000 |
| Recoverable Depreciation | $0 | $400,000 |
| Deductible | ($100,000) | ($100,000) |
| Total Payout | $500,000 | $900,000 |
Unmatched property damage exclusion
If siding, roofing, or other exterior elements are damaged and the original materials are no longer available, the insurer may only pay to repair the affected areas — even if the result is a visible mismatch. For example, imagine your HOA's siding sustains $250,000 in hail damage, but the full siding system is worth $1,000,000. If the original material has been discontinued, your policy likely won’t cover the remaining $750,000 to replace the rest of the siding just for aesthetic consistency. That difference can be a major out-of-pocket cost for the association.| Exclusion Example | Standard Example | |
| Total Damage | $250,000 | $250,000 |
| Undamaged Portion | $750,000 | |
| Total Cost | $250,000 | $1,000,000 |
| Deductible | ($100,000) | ($100,000) |
| Total Payout | $150,000 | $900,000 |