Condo Insurance vs HOA Coverage

Two documents insure a Texas condo

A Texas condominium is insured by two documents at once. The association’s master policy covers the building and the common elements, and a condo unit owner policy written on the HO-6 policy form covers what the master policy leaves to the unit owner.

Where that line falls is not standard. The master policy and the declaration set it together, so one floor plan can sit behind bare studs in one building and finished walls in another.

Texas Property Code §82.111, part of the Texas Uniform Condominium Act, requires the association to carry, to the extent reasonably available, property insurance on the common elements and commercial general liability. In a stacked building the property coverage must include the units as built, but need not include improvements and betterments installed by unit owners. Those owner finishes and upgrades are what the HO-6 policy form answers. The HO-6 policy form carries those improvements and betterments.

What the association’s master policy insures

The association’s master policy is a commercial property and liability contract bought by the association, and a unit owner does not choose its terms.

A master policy answers four things:

• The building structure, the roof and the exterior walls
• Common elements such as hallways, elevators, the pool and parking areas
• Liability for injuries in those areas, which Texas Property Code ch. 82 requires on common elements
• The association’s own property and equipment

The master policy also carries a deductible, and that line is the one a unit owner has most reason to read. A large building deductible is rarely the association’s bill alone, because the declaration usually allows it to be charged back to the units.

What the HO-6 policy form insures

An HO-6 policy form is the unit owner’s half of the arrangement, written to start where the master policy stops.

An HO-6 policy form carries six parts:

• Coverage A, building property, which is the interior finishes and improvements belonging to the unit
• Coverage C, the owner’s personal property
• Coverage D, loss of use, which funds somewhere to stay during repairs
• Coverage E, personal liability for the unit owner
• Coverage F, medical payments for an injured guest
• Loss assessment, a separate limit for the owner’s share of a charge levied after a loss

Coverage A on an HO-6 policy form is sized from an estimate to rebuild the interior, not from the purchase price. The land, the structure and the roof already sit inside the master policy limit.

Who insures what, by master policy type

The master policy’s coverage type decides how much an HO-6 policy form carries, and the declaration names it as bare walls, single entity or all-in.

What is damaged	Bare walls	Single entity	All-in
Roof, exterior walls, studs, subfloor	Master policy	Master policy	Master policy
Drywall, paint, cabinets, flooring as installed	HO-6 Coverage A	Master policy	Master policy
Owner upgrades	HO-6 Coverage A	HO-6 Coverage A	Master policy, where the form says so
Furniture and electronics	HO-6 Coverage C	HO-6 Coverage C	HO-6 Coverage C

Reading the declaration for the type, then the master policy for the wording, is the only way to size Coverage A. Assuming the type is the expensive mistake.

Loss assessments, and why the limit is the part to check

Loss assessment coverage on an HO-6 policy form pays a unit owner’s share of a charge the association levies after a covered loss, up to the limit printed on the declarations page and no further.

Two charges reach a unit owner this way:

• A loss larger than the master policy limit, assessed back across the units
• The master policy deductible itself, assessed back across the units after a wind or hail claim

Loss assessment coverage does not answer every assessment. The HO-6 policy form conditions it on the cause of loss, on the limit chosen and on the association’s authority to levy, so a charge for deferred maintenance, an uncovered cause or a construction project is a separate question. Checking the master policy deductible is what sets the limit.

The gaps that show up after a loss

A condo gap is the distance between what the master policy stopped at and what the HO-6 policy form was sized to carry.

Where the two documents fail to meet:

• An owner who assumed all-in and holds bare walls, short by the cost of every finish in the unit
• Upgrades installed across two or three ownerships that nobody added to Coverage A
• Two deductibles on one event, one on the master policy and one on the HO-6 policy form
• A separate wind and hail deductible on the master policy, written as a share of the building value

The TDI Home insurance guide explains how a deductible is applied to a residential property claim.

What to have ready before you ask an agent

Start with the master policy certificate and the declaration. The association holds both, and those two documents settle the rest of the file.

Have these in front of you:

• The master policy certificate, with the coverage type and the deductible shown
• The declaration clause that divides the insuring duties
• Unit size in square feet, the floor number, and the building’s year of construction
• A list of interior upgrades, with roughly when each was installed
• The HO-6 declarations page in force now, if the unit is insured
• Prior claims on the unit, and any assessment the association has levied

Aulona Insurance Group places the coverage this question is about: Condo Insurance in Texas. Luka Cenaj works through the master policy certificate on a recorded call before a unit is taken to market.

Where Aulona Insurance Group is not the right fit

Aulona Insurance Group places the unit owner’s policy and not the association’s, and that difference belongs at the start of an application.

Outside what the agency places on a condominium:

• The association’s master policy, which underwrites as commercial habitational property; the agency’s small-business program stops at $5 million of total insured value per location
• A reading of the declaration for the association, a board document and a question for the board’s own counsel
• Any risk that has to go to surplus lines, which Aulona Insurance Group cannot place in-house
• Residential buildings of more than four units, which underwrite as commercial habitational property rather than on a dwelling form

An owner serving on a condo board takes the master policy to a commercial habitational market. Texas Home Insurance names the rest of what the agency places.