HOA Master Policy vs Unit Owner Policy: What Boards Need to Know

When Nobody Knows Who Pays

Last month, I got a call from an HOA board president in Colorado Springs. A pipe had burst on the third floor and water poured down through four units below it. The damage came to $185,000 — drywall destroyed, flooring ruined, and two owners had to move out temporarily. The board assumed the master policy would handle everything. The unit owners assumed the same thing. The adjuster showed up and told everyone they were wrong.

This happens more often than you'd think. The gap between what the HOA master policy covers and what unit owners think it covers is the single biggest source of insurance disputes in community associations. When nobody understands who pays for what, you end up with finger-pointing, uncovered losses, and emergency special assessments that make everyone angry.

Look. Every board member and every unit owner needs to understand this before a loss happens, not after.

What the Master Policy Actually Covers

An HOA master policy is a commercial insurance policy that the association purchases to cover the shared property that the HOA is responsible for maintaining. Think of it this way: if the HOA would have to repair or replace it using association funds, it should be covered under the master policy.

This typically includes the building structure itself (exterior walls, roof, foundation), common areas like lobbies, hallways, elevators, and stairwells, shared amenities such as pools, clubhouses, and fitness centers, and building systems including plumbing mains, electrical panels, and HVAC equipment that serves the whole building.

What the master policy does not cover — and this is where the confusion starts — is anything inside a unit owner's four walls. Personal belongings, appliances the owner installed, countertops, flooring upgrades, bathroom renovations — none of that is on the master policy. It also doesn't cover a unit owner's personal liability if someone gets hurt in their unit.

Three Types of Master Policies

Here's where it gets more nuanced. Not all master policies are created equal. There are three types, and the type your HOA carries determines exactly where the association's coverage ends and the owner's coverage begins.

Bare walls-in is the most common and the most limited. It covers the structure itself — exterior walls, roof, floors, and building systems — but nothing inside the individual units. No drywall, no paint, no fixtures, no flooring. If you have this type, unit owners are responsible for insuring everything from the studs inward, including any original fixtures that came with the unit.

Single entity covers the structure plus the original fixtures and finishes as they were when the units were first built or sold. So original countertops, original carpet, original cabinets — those would be covered. But any upgrades or renovations the owner made after purchase are not included. This is a significant step up from bare walls-in.

All-in is the broadest option. It covers the structure, original fixtures, AND owner improvements and upgrades. If someone remodeled their kitchen, that's covered under the master policy. These policies cost more, but they dramatically reduce the gap between master policy and HO-6 coverage.

Most HOAs I work with carry bare walls-in policies, which means unit owners carry the most responsibility. If your board doesn't know which type you have, that's the first thing to find out.

What an HO-6 Policy Covers

An HO-6 policy is what unit owners buy to cover what the master policy doesn't. Think of it as the other half of the equation. A good HO-6 policy includes dwelling coverage for interior walls, flooring, cabinets, fixtures, and any improvements you've made to the unit. It includes personal property coverage for furniture, electronics, clothing, and other belongings.

It also includes personal liability in case someone gets injured in your unit, additional living expenses if you need to live elsewhere during repairs, and — this is the big one — loss assessment coverage.

Loss assessment coverage is what pays your share if the HOA issues a special assessment after a large loss that exceeds the master policy limits. Standard HO-6 policies include $1,000 in loss assessment coverage. That's almost never enough.

Here's the thing. I recommend $50,000 minimum, and for high-rise buildings in expensive markets, $100,000 is better. Use our HOA insurance calculator to see what your association should be carrying.

Master Policy vs HO-6: What Each Covers

What Needs Coverage	Master Policy (Bare Walls-In)	HO-6 (Unit Owner)
Roof and exterior walls	Covered	Not covered
Common area hallways, lobbies	Covered	Not covered
Pool, clubhouse, elevators	Covered	Not covered
Building plumbing/electrical mains	Covered	Not covered
Interior drywall and paint	Not covered	Covered
Flooring (carpet, tile, hardwood)	Not covered	Covered
Kitchen cabinets, countertops	Not covered*	Covered
Personal property (furniture, etc.)	Not covered	Covered
Owner renovations/upgrades	Not covered	Covered
Personal liability	Not covered	Covered
Loss of rents / additional living	Not covered	Covered
Special assessment after a loss	N/A	Covered (loss assessment)

*Single entity and all-in master policies may cover original fixtures and/or owner improvements. See your declarations page.

The Special Assessment Trap

Here's the scenario that keeps board members up at night. A major fire or water event causes $2 million in damage. The master policy has a $1 million property limit. The HOA is now $1 million short — and that shortfall gets divided among all unit owners as a special assessment.

In a 50-unit building, that's $20,000 per owner. If owners don't have adequate loss assessment coverage on their HO-6 policies, they're paying that out of pocket. I've seen boards in Texas and Colorado face exactly this situation, and it creates financial hardship for owners and legal liability for the board.

The fix is two-fold. First, make sure your master policy limits are adequate for the actual replacement cost of the building — not the market value, the replacement cost. And second, require all unit owners to carry HO-6 policies with meaningful loss assessment limits. Many CC&Rs allow the board to mandate this, and if yours don't, it's worth amending them.

In California, the Davis-Stirling Act requires HOAs to distribute an annual insurance disclosure to owners that explains what the master policy covers and recommends owners purchase HO-6 coverage. Even if your state doesn't require this, it's a best practice every board should follow.

What Boards Should Do Right Now

If you're on an HOA board and you're not sure where your coverage stands, here are the specific steps I'd recommend. Pull out your master policy declarations page and confirm whether you have bare walls-in, single entity, or all-in coverage. Then check your property limits against a current replacement cost appraisal — buildings built for $5 million ten years ago might cost $8 million to rebuild today.

Review your CC&Rs to see if you can require unit owners to carry HO-6 policies, and if you can, send a communication to all owners explaining what the master policy covers, what it doesn't, and what their HO-6 policy should include. Download our HOA Board Insurance Guide for a full checklist.

The board's job is to protect the association — and that starts with understanding exactly where your insurance coverage begins and ends. If you need help reviewing your current master policy or getting quotes from multiple carriers, reach out to us. We work with HOAs across 29 states and can usually have options back to you within 24 hours.

About the Author
Bobby Friel is a licensed insurance agent and founder of Direct Insurance Services, specializing in HOA, contractor, restaurant, and commercial landlord insurance across 29 states. He has helped hundreds of HOA boards structure their insurance programs to eliminate coverage gaps.