What does an HOA master policy actually cover?

The property coverage insures the buildings and common elements against physical loss. Under the Fannie Mae Selling Guide, section B7-3, this has to be written on a replacement-cost basis at 100 percent of the project improvement value for units to be warrantable. Florida Statute 718.111(11) requires the same replacement-cost standard, validated by an independent appraisal updated at least every 36 months.

How far this coverage reaches into a unit depends on the valuation basis, bare-walls, single-entity, or all-in, set by the declaration. That single choice determines whether a unit interior is the association responsibility or the owner responsibility after a loss.

Commercial general liability covers the association against bodily injury and property damage claims from the common areas, such as a slip and fall at the pool, commonly written at one to two million per occurrence with an umbrella layered above.

Directors and officers liability covers the board for governance decisions, a separate exposure from bodily injury, and one that mostly consists of defense costs. In California, carrying D&O at the statutory level is part of what preserves the volunteer director liability shield under Civil Code 5800.

A fidelity or crime bond protects association funds against theft. The Fannie Mae Selling Guide, section B7-4-02, requires it for projects over 20 units at three months of assessments plus reserves, and California Civil Code 5806 sets a parallel floor. If a management company handles the funds, the bond must extend to cover it.

Beyond the core policies, several endorsements decide whether a loss becomes a special assessment. Ordinance or law covers the extra cost of rebuilding an older building to current codes. Equipment breakdown covers sudden mechanical or electrical failure of elevators, HVAC, and pumps. Flood is covered separately and is a warrantability requirement in a FEMA Special Flood Hazard Area. In coastal states, a percentage-based wind or hurricane deductible sits on the property coverage and can pass a large number through to owners.

The master policy does not cover a unit owner personal property, loss of use, personal liability, or, depending on the valuation basis, the unit interior. Those gaps are filled by an individual unit owner HO-6 policy, including loss assessment coverage that pays a unit owner share of a special assessment after a covered common-element loss. A board cannot buy HO-6 coverage for owners, but it should tell them what the master policy leaves for them to insure.