Walls-In: What an HO-6 Covers in a Claremont Condo

Buy a house and you insure the whole thing. Buy a condominium and you insure part of it, and the association insures the rest, and the boundary between those two is written in documents most owners never read past the first page.

That boundary is the entire subject. Get it wrong in either direction and you are either paying twice for the same thing or carrying a gap you do not know about.

Two policies, one building

The association carries a master policy. Broadly, it covers the building structure and the common areas: roofs, exterior walls, hallways, shared systems, and the grounds.

The individual owner carries what is usually called an HO-6, and the shorthand for it is walls-in. It picks up where the master policy stops, along with your personal property, your liability, and your loss of use if the unit becomes uninhabitable.

The trouble is that walls-in is a description, not a definition. Where the wall begins is a question the governing documents answer, not a question the shorthand answers.

Bare walls, single entity, and all in

Master policies broadly fall into a few shapes, and knowing which one your association carries is the single most useful fact in this article.

A BARE WALLS approach generally covers the structure and leaves nearly everything inside the unit to the owner. Cabinets, flooring, fixtures, and often the drywall surface itself become the owner's responsibility.

A SINGLE ENTITY approach generally includes the original fixtures and finishes as they were built, while leaving owner upgrades and improvements to the owner.

An ALL IN approach generally reaches furthest into the unit, including improvements, though it still stops short of personal property and personal liability.

Those are broad shapes, not universal terms. The actual answer sits in the CC&Rs and the master policy declarations, and associations occasionally change their approach at renewal without every owner noticing.

The upgrade gap

Here is where owners get hurt most predictably.

Somebody buys a unit, replaces the kitchen, redoes the bathroom, and puts in flooring. Under a single entity master policy, the association covers the original finishes. The improvements are the owner's problem, and the HO-6 needs a limit that reflects them.

If the HO-6 was written when the unit was original, and the interior has since been substantially upgraded, the gap is exactly the cost of the upgrades. Nobody sends a notice about this. It is discovered after a loss.

The fix is the same one that applies after any renovation: call your agent when the work finishes and revise the limit. The general version of that habit is in what your policy stops covering during a renovation.

A boundary worth repeating: Anthony Grynchal is a licensed real estate salesperson, not an insurance broker or an adjuster. Nothing here is a coverage opinion, and the decisions below belong with a licensed insurance professional reading your actual documents.

Loss assessment, the coverage nobody buys until they need it

Associations can assess their members. If a covered loss exceeds the master policy, or if the association faces a liability claim beyond its limits, the shortfall can be distributed across the ownership as a special assessment.

Loss assessment coverage on an HO-6 is designed to respond to that share. It is usually a modest add-on relative to the exposure it addresses, and it is the piece most likely to be missing from a policy that was bought purely to satisfy a lender.

Two things to ask. What limit of loss assessment coverage is on the policy, and does it respond to the association's deductible as well as to losses that exceed the master limits? The second question matters because a high master deductible passed through to owners is a common real-world scenario.

What to read before closing

During escrow on a condominium you are entitled to association documents, and the insurance portion of that package is worth actual attention rather than a skim.

Get the master policy declarations page, not a summary. Get the CC&R sections describing what the association insures and what the owner insures. Find the master policy deductible and find out how the association allocates it. Ask whether there are open claims, pending assessments, or any coverage the association has recently lost.

Then hand all of that to the insurance professional writing your HO-6 and ask them to size the policy against those specific documents. That is the entire point of reading them.

It fits into the same escrow window as the rest of the coverage work, which is laid out in binding coverage on a Claremont purchase.

Water, which is the condo claim

In attached housing, the most common loss is water, and the reason it is more complicated than in a detached house is that water does not respect the boundary between units.

A failure in one unit can damage two or three others. The question of whose policy responds, and whether the association's deductible applies, is answered by the governing documents and by the facts of the failure, not by who was inconvenienced.

The sudden-versus-gradual line still governs the underlying claim, exactly as it does elsewhere, and it is set out in how water damage exclusions work. In a condominium it just has more parties attached to it.

The summary

Condo insurance is not smaller homeowners insurance. It is a second policy designed to interlock with a first one you do not control, and the interlock is defined in documents specific to your association.

Read the master policy. Size the HO-6 against it. Add loss assessment. Update the limit after any upgrade. That is most of the job.

For the surrounding decisions on a Claremont property, browse the home insurance resources. For sizing an HO-6 against your association's actual master policy, work with a licensed insurance professional, and for interpreting the CC&Rs, with an attorney where the language is genuinely unclear.

Anthony Grynchal has been licensed in California since November 2009.