HOA Fees Vs. HOA Insurance - What's the difference?
Homeowners' dues or fees and Homeowners insurance may sound similar to you, but they are very different terms.
Homeowners associations (HOAs) are organizations that are designed to set up and enforce rules for certain properties and the residents who live in them. These groups are typically created in planned communities, subdivisions, or condo buildings. People who purchase these properties automatically become members of the association. As such, they are required to pay their dues through monthly fees, which are called homeowners association fees.
HOA fees are regular payments made by homeowners to the homeowners association to cover common expenses like maintenance, landscaping, repairs, and amenities. These fees are used to fund the operations of the community and may vary depending on the size and type of the community.
HOA fees paid by condo owners usually cover the costs of maintaining the building’s common areas, such as:
Fees may also cover some common utilities, such as water/sewer fees and garbage disposal. The association may also levy special assessments from time to time if its reserve funds (funds set aside for major and/or emergency repairs) are not sufficient to cover a major repair, such as a new elevator or roof.
These fees can also apply to single-family houses—especially town houses—in certain neighborhoods, particularly if there are common amenities like tennis courts, a community clubhouse, or neighborhood parks to maintain.
HOA fees tend to vary drastically, depending on the property or community. The fees range anywhere from $100 to $1,000 per month. The average, though, tends to be from $200 to $300 per month. The general rule that applies is the more services and amenities, the higher the fees.
If a member fails to remit payment to the HOA, it affects the other members of the community. Common areas may suffer due to lack of funds, or other members may be assessed special fees to cover maintenance costs or other expenses.
HOA Insurance, on the other hand, is a policy that the HOA purchases to protects its assets and the homeowners from various risks like property damage, personal injury, and legal liability. This insurance coverage is essential to safeguard the community from unforeseen events that can cause financial losses. HOA insurance typically covers common areas like community buildings, pools, and playgrounds, as well as liability coverage for the HOA and its board members.
While HOA insurance pays for property damage and liability expenses shared by a community, your own homeowners insurance or condo insurance pays for damage to your residence and belongings. Your policy also covers your legal defense and settlements if you’re sued for an accident for which you’re responsible (even if that accident happens in a common area).
For example, an HOA insurance policy would cover the HOA’s legal defense if someone sues after getting hurt at the community pool, but your own homeowners insurance policy would apply if someone sues you because your dog bit them at the community park.
A traditional homeowners insurance policy also pays for repairs and replacement of damage to your house and replacement of your personal possessions after a covered loss. If a tornado ravages your neighborhood and destroys your house and all your belongings, the house structure and your personal possessions would be covered by your homeowners insurance policy. HOA insurance would cover physical damage done to shared structures in the neighborhood, such as a clubhouse or community fitness center.
For condo owners, an HOA insurance master policy covers the exterior of your building and shared common areas. You need your own condo insurance policy to provide protection for the interior of your unit. Like homeowners insurance, condo insurance covers your personal property (such as furniture, clothing, TVs and dishes) and provides liability protection. It also provides coverage for interior walls if they are damaged, such as in a fire.
In summary, HOA fees are regular payments to cover operational expenses, while HOA insurance is a policy that provides protection for the community and homeowners from various risks.