Skip to main content

Click here to download this blog as a pdf

Living in a community with an HOA (Homeowners Association) usually comes with great perks like swimming pools, fitness centers and less property maintenance.  While there are many advantages to living in an HOA community, one major drawback can be property insurance claims.

In 2018, $2 billion of property damage was caused by hail events in the Denver, CO metro.

  While HOAs are covered by property insurance, those who reside in an HOA are vulnerable to high out of pocket costs.  This is due to the insurance deductibles.

Where HOAs used to see deductibles of $10,000-$100,000, they now see $500,000-$1,000,000+.  Insurance companies now write policies that designate the deductible to be a percentage of the entire property’s value.  For example, a new policy may have a 5% deductible.  So on a property that is worth $10,000,000, the deductible will be $500,000. 

What happens when the HOA doesn’t have half a million in the reserve bank account?  The residents are charged a special assessment.    Imagine being 1 of 40 units that has to split a $500,000 tab.

Oftentimes a special assessment results in thousands of dollars being assessed.  This typically catches residents by surprise, afterall, what are all those HOA dues going towards?

In a recent claim that HomeGuard was involved in, the individual resident was responsible for over $20,000 to get the roof and gutters replaced from a hail claim.  There were however, a small group of homeowners within the HOA that didn’t have to pay $20,000+ out of pocket.  This was because of a simple and cheap individual insurance policy called an HO6.

An HO6 policy protects an individual from the costs billed through a special assessment for an insurance claim.  HO6 policies are very low cost and homeowners can get them through their current home insurance or auto carrier.  We recommend calling your trusted agent for rates.

A few things to know about HO6 policies:

  • Most carriers offer coverage based on the date of the storm
  • Some carrier’s coverage is based on the date of the assessment from the association

If you know your property has damage from a past hail or wind event, be sure to ask your agent about a policy that bases coverage on when the assessment occurs.  

If you live in an HOA, do yourself the favor and get an HO6 policy.

Insurance coverage, HOAs, reserves figures are all confusing.  When living in an HOA ask yourself these questions:

  • What does my HOA monthly dues cover?
  • How much does my HOA have in reserves?
  • What is my HOA’s insurance deductible?
  • What is my responsibility for insurance coverage?

Have questions about your own homeowner’s insurance policy? Want to learn more about what your HOA might be able to charge you for? Call HomeGuard at 720-708-4126 and one of our representatives would gladly walk you through it.