Your HOA Insurance Responsibilities: HO-3 Vs. HO-6
Owning a condo, townhouse or any other type of home is exciting, but comes with a lot of responsibility. From paying monthly bills on time to keeping up with housework and having the right homeowner’s insurance in place, the to-do list can often seem never-ending.
Buying homeowner’s insurance for a home in an HOA or community association is not the same as buying insurance for a home that is not part of an association. Community homeowners should be aware of the different coverages offered by an HO-3 vs. HO-6 and other policies. It is very important for to understand what type of policy is necessary for proper coverage as dictated by the community’s master deed.
HO3 vs. HO6 and Other Policy Types
Deciding which specific type of insurance policy you need begins with understanding the various choices and what they cover.
The most basic type of homeowner’s insurance policy is the HO-1. Coverage for claims is limited to ten types of events or perils, including fire, explosion, lightning, hail/windstorms, theft, vandalism, vehicle damage to the structure, damage from aircraft, riots, and volcanic eruption.
Homeowners looking for more coverage than what is included in the HO-1 can choose the HO-2 or broad form policy. The HO-2 policy comprises the above events in addition to, falling objects, weight of ice/snow/sleet, freezing of household systems, sudden or accidental breaking or cracking of household systems (water pipe), accidental overflow of water, and damage from electrical currents. Coverage is limited to the covered events listed in the policy.
Choosing an HO-1 or HO-2 policy leaves homeowners open to potential uncovered claims. Also referred to as a “special form” policy, the HO-3 is the most common type of homeowner’s insurance. Homeowners looking for more extensive coverage often choose the HO-3 because it doesn’t limit them to the events listed. Instead, this policy outlines events not covered, including earthquakes or floods. The policy typically covers anything not listed as an exclusion. Coverage is included for the house structure and additional structures on the property, such as a shed or garage, and personal belongings.
For those living in a condominium, policy options are typically limited to purchasing an HO-6, also known as condo insurance. Condo insurance is sometimes referred to as “walls in” coverage because it only covers the condo owners’ personal property, liability coverage, and pays expenses if the unit becomes uninhabitable. The HOA is commonly responsible for having insurance in place to cover the structure of the building. This expense is passed on to members through monthly dues or assessments. The type of covered events is usually the same as what is included in a standard homeowner’s insurance policy.
Before deciding which type of home insurance to buy, it is imperative for community members to review guidelines provided by the HOA for insurance requirements. Some associations may require members to have a specific type of policy in place. When it is time to shop for insurance, review the policy types, including the exclusions, before making a final decision to assure the home is fully protected.
AR Management helps homeowners and community associations with all aspects of property management, including ensuring proper insurance coverage. For more information, contact our office today!