Coordinating Your HO6 with Your Master Policy

October 4, 2012

Every owner of a townhome, condominium or cooperative should have a homeowner’s insurance policy. The common policy form is called an HO-6 policy. Before determining the exact level of coverage needed on an HO-6 policy, you must know what type of coverage the association is required to carry based on the association’s governing documents. Is it all-in, original specifications or some level of bare walls coverage and does the association’s policy follow the governing document requirements? Generally, the declaration contains specific insurance requirements, but other sections, including the articles of incorporation, bylaws and rules & regulations may have insurance requirements that supplement the declaration.

An HO-6 policy provides coverage for permanently attached items on the inside of your home that you may be responsible to insure such as cabinets, floor coverings and light fixtures. These items may be called coverage A, real property or dwelling, depending on the carrier. The policy will also provide coverage for your personal property (furniture, clothing, personal items, etc.), loss of use or additional living expense and personal liability including medical payments to others. Loss of use or additional living expense provides for the reasonable costs to live elsewhere after a covered loss. An example would be if your unit was damaged by fire and you had to find other living arrangements while repairs were being made. Personal liability will pay sums you are legally obligated to pay as a result of damages arising out of bodily injury or property damage. Medical payments to others provides coverage to anyone that is injured while in your unit.

Another important coverage part of the HO-6 policy is Loss Assessment. The insurance company will pay up to the limit on your policy for your share of a loss assessment charged by the association against you as an owner. This can occur when the association carries a high deductible or has inadequate or no coverage in a particular area and all homeowners are assessed for the shortfall. Some policies provide only a minimum of $1,000 of loss assessment coverage. Check with your HO-6 carrier for increased limit options.

In coordinating your HO-6 policy with your association’s master policy, the two most important coverages are coverage A and loss assessment. Your coverage A limit should always be at least equal to the master policy deductible as you will be responsible for damage to your unit that falls under the master policy’s deductible or that may not be covered under the master policy.

Once you determine the extent of coverage on the master policy; all-in, original specifications or bare walls, you can determine what items and limits you need on your HO-6 policy.