A condominium is insured twice, by two different parties, and the gap between the two policies is where owners get hurt. The association buys a master policy on the building and common areas. You buy an HO-6, the unit owner's policy, for the rest. If the association's policy covers less than you assumed, or you carry less than the master leaves out, a covered loss turns into a bill. This post shows how to read where the line falls, what a lender requires on each side of it, and how to size your own coverage from the association's documents. It does not quote premiums: the site's home-insurance premium data is for single-family (HO-3) policies and does not describe an HO-6, so no premium figure here is presented as a condo premium. For what the HOA fee itself pays for, see the HOA costs guide.
Three kinds of master policy, and why the label decides everything
The Washington State Office of the Insurance Commissioner explains that the coverage for the structure of an individual unit is based on the community's governing documents and falls into one of three categories. The names vary by state and by insurer, but the three structures are consistent.
| Master policy type | Master policy covers | You (HO-6) must cover |
|---|---|---|
| All-in | The exterior and all interior finishes: doors, windows, siding, shower or tub, vanity and cabinets, paint, baseboards and trim, light fixtures, floor coverings. | Your belongings, liability, loss of use, loss assessment, and any improvements you added beyond the original unit (depending on the policy). |
| All-in, excluding improvements or betterments | The unit restored to its original interior and exterior finishes. Owner upgrades are not covered, for example replacing original laminate counters with granite. | Everything above plus the cost of the upgrades you made, such as the kitchen or bath remodel. |
| Bare walls (walls-out) | Damage up to the uncovered sheetrock and subfloor, which includes the roof, maybe the windows, and other common areas. | All interior finishes: cabinets, fixtures, flooring, paint, and everything inside the drywall line that is yours. |
Categories and examples from the Washington State Office of the Insurance Commissioner's condo insurance guide, read 2026-10-06. Some governing documents use other terms, so use your documents' wording, not these labels, to decide.
The same building can sit under any of the three. Two owners in different associations can both pay HOA dues for "insurance" and own very different amounts of risk. The practical consequence: never assume a type from the fee. Read the declaration (the recorded document that creates the condominium) and the bylaws, or ask for the insurance summary, before you set a dwelling limit.
What the lender requires of the master policy
When a condo loan is sold to Fannie Mae, the project itself must meet insurance standards, and those standards tell you what a competent master policy looks like. Fannie Mae's master property insurance requirements call for coverage of at least 100% of the estimated replacement cost value of the project improvements, including common elements and residential structures. The lender may rely on guaranteed replacement cost coverage or its equivalent, extended replacement cost coverage or its equivalent, a replacement cost value estimate provided by the insurer, the project's insurance risk appraisal, or a statement from the insurer or another professional with appropriate expertise. The policy should be written on a Special coverage form or equivalent, and building ordinance or law coverage is required (loss to the undamaged portion of a building, demolition costs, and increased costs of construction), except where it is not obtainable in the insurance market available to the association.
HUD's FHA rules for approved condominium projects set a parallel standard. In Handbook 4000.1 (Update 18, issued 8/12/2026) the association's master or blanket hazard policy must be in an amount to fully cover the insurable replacement cost of all Units and all insurable Common Elements in the approved project. Any policy with a coinsurance clause must include an agreed amount endorsement, selection of the agreed value option, or an amount of coverage to fully cover that insurable replacement cost.
The master policy deductible is the number that reaches you
The master policy's deductible is set by the association, but a covered loss can still land on the owners. Fannie Mae's master-policy rules allow two structures: a per-occurrence deductible of up to 5% of the master policy's coverage amount, or a per-unit deductible of up to $50,000 per unit, and a per-unit deductible requires unit owners to maintain their own policies. A 5% deductible on a large building is large in absolute terms, and when a loss exceeds it the association collects its deductible share from the owners through a special assessment.
| Item | Figure |
|---|---|
| Master policy coverage amount | $30,000,000 |
| Maximum per-occurrence deductible at 5% | $1,500,000 |
| Number of units, equal ownership shares | 60 |
| Deductible share per unit if the full deductible is assessed | $25,000 |
| Same building, per-unit deductible at the $50,000 maximum | Up to $50,000 for each affected unit |
Illustrative arithmetic. The 5% and $50,000 limits are from Fannie Mae Selling Guide B7-3-03 (effective 08/05/2026). The coverage amount, unit count and ownership shares are invented to show the calculation; your declaration sets how a deductible or assessment is divided.
This is why the deductible, not the premium, is the line item to read in the association's insurance summary. A master policy with a low premium and a high deductible has moved risk from the association's budget to your checking account. The Washington OIC guide says unit owners are responsible for the community deductible on their individual policies and receive a certificate of insurance annually confirming limits and deductibles. Use it.
What your HO-6 actually covers
The NAIC's consumer guide describes the condominium unit owners form as the policy for owner-occupants of condominium units: it insures your personal property and your walls, floors and ceiling against the perils in the broad form. The Washington OIC breaks the parts out: dwelling coverage for your unit's structure, personal liability, premises medical, additional living expenses, personal property, and loss assessment.
- Dwelling coverage (the building portion of the HO-6). Covers the interior the master policy does not: finishes in a bare-walls building, betterments in an all-in-excluding-improvements building. This is the limit you must size.
- Personal property. Your furniture, clothing and electronics. The OIC notes it is often settled at actual cash value, not full replacement value, so a replacement-cost endorsement is worth pricing.
- Loss of use (additional living expenses). Pays for temporary housing if a covered loss makes the unit unlivable.
- Personal liability and premises medical. Covers injuries to others in your unit. The master policy covers the common areas, not your unit.
- Loss assessment. Helps pay a special assessment the association charges members for a loss it sustained, for example when storm damage exceeds the master policy's limits.
The OIC also lists what typical policies exclude: community property, flood, earth movement, and wear and tear. Flood is handled differently from the rest. For an attached condominium in a Special Flood Hazard Area, Fannie Mae asks the lender to verify that the association maintains a Residential Condominium Building Associated Policy (RCBAP) or equivalent private flood coverage, and HUD's Update 18 likewise puts the flood requirement on the Condominium Association, covering the buildings for unit owners and common areas alike. Ask the association for its flood policy, and see our flood insurance cost calculator for how flood premiums move with zone and elevation.
How to size your dwelling coverage from the association's documents
Sizing is a three-step exercise. You are insuring the difference between what the master policy restores and what your unit would need to be livable again.
- Get the documents. Request the declaration, the bylaws, and the current certificate of insurance or insurance summary from the association. The Washington OIC's advice is to speak with the president or the property manager, and it notes that unit owners receive a Certificate of Insurance each year when the community policy renews, confirming the limits and the deductible. Ask specifically for the master policy type, the coverage limit, and the deductible.
- Mark the line. Write down what the documents say the association insures: interior finishes, fixtures, original cabinetry. Everything on the other side of that line is yours.
- Price your side. Add up the replacement cost of what you must insure: finishes and fixtures if bare walls, or only your upgrades if the master is all-in excluding betterments. Use your remodel receipts, contractor quotes, and a walk-through of the unit with the room list in hand.
| Component | How to price it | Example figure |
|---|---|---|
| Kitchen cabinets, counters, sink and appliances built in | Remodel receipts or a contractor quote at current prices | $32,000 |
| Bathroom finishes and fixtures | Quote for tile, vanity, tub or shower, fixtures | $14,000 |
| Flooring throughout | Area times a current installed price per square foot | $11,000 |
| Paint, trim, doors, lighting, interior drywall finish | Quote or per-room allowance | $9,000 |
| Total dwelling (HO-6 interior) coverage target | Sum of the above | $66,000 |
Every figure is an example to show the method; none is a market price. Get quotes at your own address. If the master policy is all-in excluding betterments, only the upgrade portion of each line belongs in the total.
Then add a cushion for the deductible. If the master policy carries a $25,000 per-unit deductible, that amount has to come from somewhere, and an HO-6 loss assessment limit lower than the deductible leaves you paying the difference. The true cost of homeownership calculator shows where an insurance line sits against dues, taxes and maintenance in a condo budget, and is a good place to test what a higher limit does to the monthly total.
One more document question worth asking before you buy: whether the master policy carries an agreed amount endorsement. HUD's condominium standard says any policy with a coinsurance clause must include an agreed amount endorsement, the agreed value option, or coverage that fully covers the insurable replacement cost, so ask which of those the association relies on. If the association's limit has not been revised in years, a loss that exceeds it becomes a special assessment, and your loss assessment coverage is the only policy line that answers it. Ask when the master policy's replacement-cost estimate was last updated, and ask to see the board minutes on the last insurance renewal. An association that has raised its deductible sharply at renewal is telling you, in effect, that the risk has moved to the owners.
Timing matters too. A buyer usually has only the contract period to collect these documents, and the lender will want the HO-6 binder before closing. Request the insurance summary the day the contract is signed, not the week of closing, so that a quote for the right dwelling limit is not rushed.
The lender's rule for the unit owner's side
A lender does not leave your side to chance. Under Fannie Mae's unit owner insurance requirements, the borrower must obtain an individual policy when any portion of the unit's interior or improvements is not covered by the master policy, or when the master includes a per-unit deductible. The policy should be written on a Special coverage form or equivalent, covering the same minimum perils as a house policy (fire or lightning, explosion, windstorm including named storms, hail, smoke, aircraft, vehicles, and riot or civil commotion), on a replacement-cost basis.
- Minimum coverage: the greater of the amount needed to restore the interior portions the master policy does not cover to their pre-loss condition, or the per-unit deductible amount, if there is one.
- Maximum deductible: the greater of 5% of the coverage amount or $2,500. The $2,500 floor means a small policy is not forced to carry a tiny deductible.
- Replacement cost basis: required, as for a house.
- Mortgagee clause: the lender is named as mortgagee on your policy, and the servicer's name and address must match; the clause and named-insured rules for one- to four-unit properties are in Selling Guide B7-3-08.
The guide recommends that borrowers work with an insurance professional to determine their individual needs, because coverage must reflect the unit's specific conditions and the master policy's terms. In practice this means the lender will ask you for a binder or declarations page on the HO-6 before closing. If your quote shows a dwelling limit well below the interior your documents leave to you, expect a request to raise it. How a house policy is tested against the same lender framework is covered in our post on how much homeowners insurance a lender requires.
Where condo owners get caught
- Assuming "all-in" without reading it. The label on a listing sheet is not the document. Read the declaration.
- Forgetting the remodel. If the previous owner replaced the kitchen, an all-in-excluding-betterments master policy will not pay for it. Your HO-6 dwelling limit must include it.
- A loss assessment limit lower than the master deductible. The deductible, not the premium, is what reaches you. Compare the two numbers.
- Treating loss assessment as unlimited. It has a limit, and the limit must be chosen. Read how your policy defines the assessments it will pay.
- Flood and earth movement. Standard unit owner policies exclude both, as the OIC notes. For flood, check whether the association carries the RCBAP or equivalent that lenders look for in a flood zone, and ask about your own coverage for contents and improvements.
- Contents at actual cash value. The OIC notes personal property is often settled at depreciated value on standard limits. Price the replacement-cost endorsement.
A condo insurance checklist before you close
- Request the declaration, bylaws, and the master policy certificate with its limit and deductible.
- Identify the master policy type in the documents' own words: all-in, all-in excluding betterments, or bare walls.
- List the interior items and improvements the master policy does not cover and price them at current replacement cost.
- Set your HO-6 dwelling limit to that total, at least, and confirm it satisfies the lender's unit-owner minimum.
- Set loss assessment at or above the master deductible share you could be charged.
- Check the deductible against the lender's maximum: the greater of 5% of coverage or $2,500.
- Confirm the lender is named as mortgagee with the exact servicer name and address, and send the declarations page before closing.
- Re-read the master policy certificate each year when you receive it.