Insurance in Community Associations: Who Covers What?

Community associations are typically required to maintain some level of insurance to protect the association, its members, and shared assets from the risk of financial loss. These requirements are shaped by governing documents, laws and regulations, lender requirements, and best practice.

Homeowners also may be required to carry their own insurance by mortgage lenders and community association rules for the replacement cost of the entire home or a portion of it, liability, and damage to other units.

One of the most common — and consequential — questions in community associations is about how insurance responsibilities are divided. Generally:

• The association insures common elements, shared risks, and sometimes units.
• Individual owners, depending on the state, could be required to insure their unit, a portion of their unit such as improvements they’ve added, or the entire home.

Owners are always responsible for their personal property and personal liability.

Clear communication and alignment between association policies and owner policies are critical to avoid coverage gaps or overlaps.

While requirements vary by jurisdiction and association type, most community associations are expected to carry the following core coverage:

Property Insurance

Pays for repair or replacement of common property and shared structures, such as buildings, roofs, hallways, amenities, association‑owned equipment, and sometimes the units or a portion of the units after a covered loss. Coverage is often written on a replacement cost basis and should define what is included.

General Liability Insurance

Responds to claims alleging bodily injury or property damage connected to common areas, helping protect association funds from lawsuits and settlements.

Directors and Officers (D&O) Liability/Management Liability Insurance

Protects board members and officers from claims tied to governance decisions, including allegations of mismanagement, breach of duty, or failure to enforce governing documents. This coverage helps protect volunteer leaders.

Fidelity/Crime Insurance

Covers financial losses caused by theft, fraud, or embezzlement involving association funds handled by board members and employees. It can be endorsed to protect against theft by management companies. Many lenders and statutes require this coverage to protect reserve or operating funds.

Meanwhile, homeowners and renters may be required to carry the following coverage:

HO-6

The condominium unit owner’s personal policy covers interior unit damage, personal property, personal liability, loss of use, and other gaps not covered by the association’s policies.

HO-3

The standard homeowner’s insurance for single‑family, detached homes typically covers the structure and property itself. The association’s policy only covers common areas.

Renters

Insurance is rarely required by law for renters but is commonly mandated by landlords through lease agreements and may be required by community associations. Policies typically protect personal property from theft or damage, cover liability for accidents, and provide “loss of use” coverage if the home becomes uninhabitable.

>>Find more guidance in Insurance in Community Associations, CAI’s new brochure developed with expert input from Community Insurance and Risk Management Specialists.

The guide includes an overview of additional coverage based on operations and risk, what isn’t covered by association policies, and the steps communities should take to evaluate and review their coverage. Available in print and digital versions. CAI members may access the digital version for free.