The Condo Insurance Limitations That Leave Owners Paying Out of Pocket

Condo insurance is more complicated than homeowners insurance. Between the HOA’s master policy and your personal condo (HO‑6) policy, gaps can form—leaving owners responsible for repairs they assumed were covered.

Quick Take

1. Gaps between the master policy and your HO‑6 policy

The HOA’s master policy covers the building’s structure—but the exact boundary between what the HOA covers and what the owner covers varies widely.

Common master policy types

• Bare walls: HOA covers only the structure; owners cover everything inside.
• Single‑entity: HOA covers original fixtures; owners cover upgrades.
• All‑in: HOA covers most interior elements, but not personal property.

2. Limited coverage for interior upgrades

HO‑6 policies often exclude or limit coverage for improvements such as upgraded flooring, cabinets, countertops, or custom fixtures.

Examples of uncovered upgrades

• Hardwood replacing carpet
• Custom cabinetry
• High‑end appliances
• Luxury bathroom remodels

3. Water‑damage exclusions and limitations

Water damage is one of the most common condo claims—but also one of the most restricted.

Common limitations

• No coverage for slow leaks or seepage
• Limited coverage for water backup
• Damage from upstairs units may fall into a gray area

4. High master‑policy deductibles passed to owners

HOAs often carry high deductibles—sometimes $10,000 to $50,000 or more. When a loss affects multiple units, the HOA may pass the deductible to owners through special assessments.

How this impacts owners

• You may owe a share of the master deductible
• Your HO‑6 policy may not cover the assessment
• Large assessments can be due immediately

5. Special assessments not fully covered

HO‑6 policies include “loss assessment coverage,” but limits are often low—typically $1,000 to $10,000—far below the cost of major building repairs.

Examples of assessments

• Roof replacement after storm damage
• Fire damage to shared areas
• Structural repairs not covered by the master policy

6. Limited coverage for shared areas and liability

Owners may be responsible for injuries or damage that occur in shared spaces if the HOA’s liability coverage is insufficient.

Potential gaps

• Injuries in hallways or stairwells
• Damage in shared garages
• Liability for guests using amenities

7. No coverage for short‑term rentals

Many HO‑6 policies exclude losses that occur while the unit is rented short‑term (e.g., Airbnb). HOAs may also prohibit or restrict short‑term rentals.

Common issues

• Damage caused by guests not covered
• Liability claims denied
• HOA fines or penalties

Quick comparison: Condo insurance limitations

FAQ: Condo insurance limitations

Does condo insurance cover the building?

No. The HOA’s master policy covers the structure; your HO‑6 covers the interior and personal property.

Does condo insurance cover water damage?

Only certain types. Slow leaks, seepage, and water backup often require add‑ons.

Does condo insurance cover special assessments?

Yes, but only up to your loss‑assessment limit—which may be too low for major repairs.

Does condo insurance cover upgrades?

Not always. Many policies exclude improvements unless you add extra coverage.

Final thoughts

Condo insurance is essential—but it’s not complete. Master‑policy gaps, upgrade exclusions, water‑damage limits, and special assessments can leave owners paying out of pocket. Understanding these limitations helps you identify coverage gaps and discuss solutions with a qualified insurance professional.