Homeowners Association (HOA) Insurance is a necessity for property owners in certain communities and residencies. Homeowners who reside in planned communities and condominiums nearly always have HOA fees, while some single-family homes will also be subject to HOA membership—particularly for those in neighborhoods with community facilities like tennis courts and swimming pools.
The HOA is responsible for creating rules related to common areas and the external structure of a property. If you’re in a homeowner’s association, you’ll pay two types of insurance: one for your home or condo and one for HOA fees. But for many new homeowners, navigating the world of the HOA can be complex. This article will help you understand what to expect and prepare for.
HOA Dues
One of the first questions you’ll have is, how much do I have to pay my HOA? Fees must be paid on a recurring monthly basis, but HOA members are also responsible for paying special assessments that fees may not cover in unexpected circumstances, such as roof repair or a new elevator.
Your HOA dues go towards several areas, including maintenance, security, HOA insurance, and improving the overall community. Condo owners’ fees typically go towards maintaining the integrity of the common areas, including landscaping, pools, lobbies, and patios. Some fees cover common utilities like garbage disposal and water and sewage.
Typical fees vary and can be anywhere from $100 per month to $700 per month. However, fees are based on what the HOA provides and is responsible for. For instance, the more amenities that a community provides, the higher the fees will be.
If you fail to follow the rules, you’ll face fines, penalties, or even be restricted from using certain facilities in your community. Some contracts impose additional late fees. Bear in mind that HOA fines are no slap on the wrist; if you continue to disobey the rules or are sued, the HOA could put a lien on your property and even foreclose on your home.
Master Policy
The master policy is the insurance that the Homeowners Association carries and must be upheld by its members. Master policies cover insurance and liability expenses that the Homeowners Association is responsible for, as well as common spaces and building damage. This protects the HOA against legal and liability issues.
Each member pays an equal amount towards the collective dues. Even if you don’t plan on using the same common facilities that are included in your dues, no one is exempt from paying them.
HOA Rules & Regulations
As a member of an HOA, you’re subject to certain rules and regulations. For example, in single-family homes, there may be certain guidelines for maintaining a specific aesthetic in the community, which might restrict you from painting the exterior of your home a specific color. Condos, on the other hand, might have rules for community pools and smoking on-premises.
Investigating Your HOA
Whenever you purchase a property, you’re expected to do your due diligence. And part of that due diligence means investigating your potential HOA before you agree to purchase a home that’s a part of a community. Remember, you’re not just buying into a home—you’re also buying into the HOA. As such, vet the HOA just as meticulously just as you do the property. Ask about their fee structure, guidelines, and process for reporting and reaching the board. When possible, talk to homeowners in the community to gain a firsthand perspective of the strengths and weaknesses of the community.
HOA Insurance vs. Homeowners Insurance vs. Condo Insurance
It’s important for you to understand the difference between HOA insurance, homeowners insurance, and condo insurance. Just as with coverage, master policies have varying coverage, and some policies only cover the bare minimum. However, HOA policies don’t cover the interior of your home and your personal property. Furthermore, it may not cover insurance if a guest is injured in your home or on the property managed by the HOA. If you have limited coverage options, you should invest in additional insurance to supplement it.
Lastly, some lenders require you to purchase homeowner’s insurance, even if your HOA provides extensive coverage. In this case, you may receive an HOA discount for your additional insurance policy.
With that in mind, the primary difference between homeowners’ insurance and condo insurance is that condo insurance typically doesn’t need to include areas of the property beyond its drywall, which means it will likely be more affordable than typical homeowners insurance.
Keep each of these things in mind as you investigate different insurance opportunities.
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