Master Insurance for Condos

This is not a quick overview. This is the full breakdown.

Condo insurance issues are often discovered too late in a transaction—after a buyer is under contract, after financing is in process, and when timelines matter most. At that point, the details can determine whether a loan closes or falls apart.

One of the most important things a lender reviews when financing a condo is the master insurance policy. A buyer can be fully qualified, the unit can appraise, and the offer can be strong—but if the condo association’s insurance does not meet lending guidelines, the loan may not close.

Of all the things that can disqualify a condo project, master insurance is the one that surprises people the most. It shows up late. It slows things down. And it sometimes derails sales. If you really want to understand how condo insurance works—and how it affects financing, risk, and ownership—read on. We’re going to go deep.

What Is a Condo Master Insurance Policy?

What Is a Condo Master Insurance Policy?

The HOA is the named insured on the policy. The premiums are paid as a common expense, which means they are built into the association’s budget and covered through the monthly dues paid by every unit owner.

When you buy a condo, you are not just buying your unit. You are buying into shared ownership of the building and everything that comes with it. The roof, the walls, the hallways, the foundation, the systems, the land—those are all owned collectively by the association.

So who insures it? The association does, through the master policy.

That master policy is what protects the entire project if something goes wrong. A fire, a storm, structural damage—those are covered at the association level.

Your individual condo insurance, typically called an HO-6 policy, works alongside that master policy. The HO-6 generally covers your personal property, your personal liability, and depending on the structure of the master policy, some or all of the interior of your unit.

And here’s the key point that ties directly into financing: every mortgage lender obtains a copy of the master insurance policy and reviews it for compliance. Not just for conventional loans, but for all loan types.

Why Lenders Care About Master Insurance

When a lender makes a mortgage loan on a condo unit, they’re not just lending against that unit. They’re lending against a share of the condominium. If a building burns down and there’s inadequate insurance to rebuild it, the collateral backing the loan is diminished.

Your individual condo insurance, typically called an HO-6 policy, works alongside that master policy. The HO-6 generally covers your personal property, your personal liability, and depending on the structure of the master policy, some or all of the interior of your unit.

And here’s the key point that ties directly into financing: every mortgage lender obtains a copy of the master insurance policy and reviews it for compliance. Not just for conventional loans, but for all loan types.

That’s the risk. And it’s why lenders won’t close a condo loan without verifying that a compliant master policy exists.

This is also why two condos in the same town, with the same price and same condition, can have completely different financing outcomes. If one association has a compliant insurance structure and the other does not, one loan closes with conventional financing and the other does not.

Fannie Mae’s requirements are spelled out in their Selling Guide, Section B7-3-03, and were most recently updated in Lender Letter LL-2026-03, issued March 18, 2026. These are the rules lenders follow when they underwrite a condo loan that will be sold on the secondary market — which is most conventional loans.

The Three Types of Master Policies

Not all master policies are structured the same way. There are three basic types, and which one your association carries determines how much your HO-6 needs to do — and whether you even need one at all for structural coverage.

Bare Walls

The most limited option. The master policy covers the structure of the buildings up to the interior surface of the unit walls — and stops there. Everything inside your unit is your responsibility: drywall, flooring, cabinets, countertops, appliances, fixtures, and any improvements you’ve made.

If your association has a bare walls policy and a fire guts your unit, the master policy rebuilds the shell. Your HO-6 has to cover everything from the drywall in.

Single Entity (Original Specs)

The master policy extends into the unit to cover original builder-installed fixtures and finishes — flooring, cabinets, countertops, appliances — as they existed when the unit was built. What it does not cover is anything you’ve upgraded or improved beyond the original condition.

If you replaced builder-grade carpet with hardwood floors, those floors are your problem in a claim, not the master policy’s.

All-In (All-Inclusive)

The most comprehensive option. The master policy covers the entire unit as it exists at the time of a loss — including any improvements or upgrades the owner has made. In a total loss, everything gets rebuilt back to its condition at the time of the claim.

This is the least common type because it’s the most expensive for the association to maintain. Don’t assume your association has it.

Types of Condo Insurance


The Type of Master Policy Determines The Type of Insurance Unit Owners Should Get

Fannie Mae is clear on this: an HO-6 is required when the master policy does not cover the interior of the unit or the unit owner’s improvements. Conversely, if the master policy is a true all-in policy — one that covers walls-in, interior finishes, and unit improvements as reflected in the appraisal — Fannie Mae does not require the unit owner to carry an HO-6 for structural coverage.

This is not a loophole or an oversight. It’s the stated Fannie Mae position: if the master policy fully covers the unit interior, there is no structural gap for the HO-6 to fill.

That said, even in an all-in project, a unit owner still has good reasons to carry an HO-6 — personal property (furniture, electronics, clothing), personal liability, loss of use if the unit becomes uninhabitable, and loss assessment coverage. But the lender cannot require it solely for structural coverage when the master policy already provides it.

In practice, bare walls and single entity policies are far more common. Most buyers in New Hampshire will need an HO-6 with meaningful dwelling coverage. But knowing whether your association’s policy is all-in — and having that documented — matters.

The starting point is always the condominium declaration and bylaws.  The type of master policy flows from the association’s governing documents. Read them, or have your insurance agent read them, before you make assumptions about what you need.

What Master Insurance Policy’s Cover

Replacement Cost, Roofs, and What the Master Policy Must Cover

The master policy has to cover the entire physical project at full Replacement Cost Value (RCV). That means what it would actually cost to rebuild — not the market value of the property, and not a depreciated value.

RCV applies to the building structure, shared walls, hallways, foundations, mechanical systems, and all common elements. If the association has a pool, a clubhouse, or any other shared amenity, those are covered under the master policy too. Everything the association owns collectively needs to be under that policy.

Roofs are the one exception worth knowing about. As of March 2026, Fannie Mae now allows the master policy to cover roofs on an Actual Cash Value (ACV) basis rather than full replacement cost. ACV factors in depreciation — so a 15-year-old roof destroyed in a storm would be paid out at what a 15-year-old roof is worth today, not what a new roof costs.

This change was made in response to rising insurance costs that were making full RCV roof coverage unaffordable in many markets. For NH associations, it may mean lower premiums. But here’s the practical reality: if ACV pays $18,000 on a roof that costs $35,000 to replace, that $17,000 gap has to come from somewhere. Usually the reserve fund — or if reserves aren’t there, a special assessment against every unit owner.

General Liability Coverage

General liability insurance protects the association when something happens in the common areas.

Someone slips on ice. A visitor is injured in a parking lot. A contractor causes damage. A pipe bursts in a shared area.

Any of these can result in a claim against the association.

General liability insurance covers those exposures. It protects the association and, by extension, the unit owners.

Insurance Deductibles for Condos

Deductibles: The Part Nobody Talks About Until There’s a Claim

The aggregate deductible is the most common structure. This is a single deductible that applies to the policy as a whole, regardless of how many units are affected by a claim. Fannie Mae caps this at 5% of the total coverage amount on the master policy. If the deductible exceeds that threshold, the project fails the insurance review and no conventional loan can close in that building until the problem is resolved.

In recent years, as insurance costs have risen sharply, some associations have accepted higher deductibles to keep premiums manageable. A higher deductible means a lower monthly cost — but if it pushes past Fannie Mae’s 5% limit, the association has traded a lower premium for a financing problem that affects every unit in the building. This tends to surface at the worst possible moment: when a buyer is already under contract and the clock is running.

What 5% actually looks like: if the master policy covers $1,000,000 in total, the maximum aggregate deductible is $50,000. If the building carries $3,000,000 in coverage, the maximum is $150,000. The percentage stays the same — 5% — but the dollar amount scales with the size of the policy. For many New Hampshire condo projects, that cap lands somewhere between $25,000 and $50,000 in practical terms.

Per-unit deductibles are a different structure — and increasingly common as insurers look for ways to manage exposure in condo buildings. Instead of one aggregate deductible for the whole policy, a per-unit deductible assigns a specific dollar amount of deductible responsibility to each unit involved in a claim. Effective July 1, 2026, Fannie Mae caps per-unit deductibles at $50,000 per unit. If a master policy carries a per-unit deductible within that limit, the project can still be warrantable — but as we’ll discuss in the next section, the presence of any per-unit deductible triggers its own set of requirements for individual unit owners.

Watch for separate wind and hail deductibles as well. Some master policies carry a standard aggregate deductible for most claims and separate, higher deductibles specifically for wind or hail. Those are subject to the same 5% cap and can cause a policy that looks compliant on the surface to fail review because of a buried peril-specific deductible. This is something lenders have to examine carefully — and something associations should be aware of at renewal time.

When the deductible is too high, there are two fixes: Renegotiate with the insurer to bring it down — usually at the cost of a higher premium — or purchase a deductible buy-back policy. This is a separate policy the HOA buys specifically to cover the gap between the master policy deductible and Fannie Mae’s allowable limit. Fannie Mae accepts it, provided the buy-back policy meets all other insurance requirements including insurer rating standards.

What doesn’t work: Individual unit owners cannot solve a non-compliant master policy deductible through their own HO-6 policies. The problem has to be fixed at the project level, by the association. There is no workaround where each buyer compensates through personal insurance.

Per-Unit Deductibles and the New $50,000 Cap (LL-2026-03)

Effective July 1, 2026, Fannie Mae introduced a new framework specifically for per-unit deductibles — a structure where the master policy’s deductible is expressed as a dollar amount per unit rather than as a percentage of total coverage.

Under this framework, the maximum allowable per-unit deductible is $50,000. A project with a per-unit deductible of $50,000 or less can still be warrantable — but the moment a per-unit deductible exists, Fannie Mae requires the borrower to carry an HO-6 policy.

This is worth sitting with for a moment. Two condos, same town and same size:

  • Condo A has a master policy with no per-unit deductible and full walls-in coverage. The unit owner has no Fannie Mae requirement for an HO-6 for structural purposes.
  • Condo B has a master policy with a $10,000 per-unit deductible. The unit owner must carry an HO-6.  The size of the deductible (up to $50,000)  doesn’t change the requirement. Even a small per-unit deductible triggers a requirement for HO-6 insurance.

It’s worth noting that the 5% aggregate cap and the $50,000 per-unit cap are separate, parallel limits — not a combined one.

The Double Deductible Problem

This is what most condo owners never hear until they’re filing a claim.

When a covered loss occurs — say a fire that damages both common areas and the interior of individual units — the sequence of events matters more than most people realize.

Step one: The association files a claim under the master policy. The association must pay its deductible before the insurance pays anything. If the association has sufficient reserves, it may absorb that cost internally. If reserves are short, the board levies a special assessment — billing every unit owner for their proportionate share of the deductible. This happens regardless of whether your unit was involved.

Step two — the assessment arrives. With a per-unit deductible, your share is the per-unit amount — whatever that is. If the master policy has a $50,000 per-unit deductible, you owe $50,000. If it’s $10,000, you owe $10,000. There’s no further division among unit owners — the per-unit amount is already your share. You file a claim under your HO-6’s loss assessment coverage, which will pay up to its limit — but first you’ll likely have to satisfy your own deductible on that loss assessment coverage before it kicks in.

Step three — the interior damage. If the same event also damaged the inside of your unit — the walls, the floors, the cabinets — and your master policy is bare walls or single entity, you file a second claim under your HO-6’s dwelling coverage. Your dwelling coverage pays for the interior repairs — after you pay the dwelling deductible on your HO-6.

The result: two separate deductibles. Both coverages may live inside the same HO-6 policy, but they operate independently. One event. Two deductible payments. Most buyers don’t know this until they’re writing both checks.

The way to protect yourself:

  1. Make sure your loss assessment coverage limit is realistic. A standard HO-6 often includes only $1,000 in loss assessment coverage. That won’t cover a $50,000 per-unit assessment. Have your insurance agent look at the master policy deductible and size your loss assessment limit accordingly.
  2. Understand your building’s per-unit deductible before you close. Ask for the master insurance certificate. Know the number.
  3. Review both deductibles in your HO-6. The loss assessment deductible and the dwelling deductible may be different amounts. Know what you’d pay under each scenario.

The HOA vs Unit Owners – who pays the deductible?

The Association  Could Pay the Deductible From Reserves Instead of Assessing Unit Owners

Whether a deductible becomes a special assessment depends entirely on the financial health of the association.

A well-funded HOA with strong reserves may be able to absorb the deductible entirely without touching individual owners. That’s actually what reserves are for — to handle unexpected costs without requiring emergency assessments. An association with a $50,000 per-unit deductible and six months of operating reserves sitting in the bank has real options.

A poorly funded association with the same deductible has essentially no choice but to assess.

You might ask: if unit owners are increasingly required to carry HO-6 policies with loss assessment coverage, why wouldn’t the board just assess owners every time instead of pulling money from reserve funds?  A few reasons:

  • Not every owner has adequate coverage. The board has no way to verify that every unit — especially investor-owned units — has an HO-6 with sufficient loss assessment limits. Some owners may have bare minimum policies or none at all. The board can’t make assessment collection contingent on whether someone’s insurance pays.
  • Special assessments take time to collect. A board vote, notice to owners, collection period — all of that takes weeks. If repairs need to start immediately, reserves are the faster path.
  • Reserves are there for exactly this. A financially responsible board treats the reserve fund as the first line of defense, not the last resort.
  • State law and governing documents may constrain how reserves are used — or how assessments are levied. Not every board has unconstrained flexibility in either direction.

The practical takeaway: A large deductible in a well-funded association is a manageable risk. The same deductible in an underfunded association is a direct threat to every unit owner’s wallet. When you’re evaluating a condo purchase, the master policy deductible and the reserve study belong in the same conversation.

When the Master Policy Has No Per-Unit Deductible and Covers Walls-In: A Different World

It’s worth pausing to describe the best-case scenario — because it does exist, and buyers in those buildings have meaningfully less exposure.

Some associations carry master policies that:

  • Cover walls-in (single entity or all-in)
  • Have no per-unit deductible (a standard aggregate deductible only)
  • Are fully funded from association reserves

In that situation:

  • Fannie Mae does not require the unit owner to carry an HO-6 for structural coverage purposes
  • If a claim occurs, the association pays the deductible from reserves without assessing individual owners
  • The unit owner’s exposure is limited to personal property, personal liability, and loss of use

The double deductible problem described above essentially doesn’t apply. The HO-6 — if carried voluntarily — becomes primarily about personal property and personal liability, not structural protection.

This is why reading the governing documents and the master policy certificate before buying matters so much. Have your insurance agent review both in determining the best coverage for you.  Two condos on the same street can have completely different risk profiles for the unit owner depending on how the association’s insurance is structured.

Waiver of Subrogation for Unit Owners

The master policy must include, or effectively provide, a waiver of the insurer’s right to pursue individual unit owners to recover what it paid out on a claim. This protects unit owners from being sued by their own association’s insurance company. If this language is missing from the master policy, it’s a compliance problem.

Loss Assessment Coverage: Sizing It Correctly

Even in a well-run building, loss assessment coverage on an HO-6 is important — and most people have far too little of it.

Standard HO-6 policies often include only $1,000 in loss assessment coverage as a default. That number hasn’t kept pace with the reality of rising deductibles. With master policy per-unit deductibles now allowed up to $50,000 under Fannie Mae’s 2026 rules, a $1,000 loss assessment limit is nearly meaningless.

The right amount of loss assessment coverage depends on:

  • The master policy deductible (or per-unit deductible)
  • How many units are in the building (for aggregate deductibles, your share is the deductible divided by the number of units; for per-unit deductibles, your share is the full per-unit amount)
  • The association’s reserve health — the better funded the reserves, the less likely an assessment becomes

When shopping for or reviewing an HO-6, have your insurance agent look at the master policy certificate. Size the loss assessment coverage to the realistic worst-case scenario for your specific building.

Fidelity Insurance: The Requirement Nobody Talks About

There’s another insurance requirement that flies under the radar and can still stop a loan from closing. It’s called fidelity insurance — also known as crime or employee dishonesty coverage.

What it covers: Fidelity insurance protects the association’s money — not the building, not the roof, not the foundation. It covers what happens when someone who handles the association’s funds — a board member, a treasurer, a property manager — steals from it. Condo associations collect dues every month and hold reserve funds that can reach hundreds of thousands of dollars. Fidelity insurance is what protects everyone if someone with access to those accounts takes money that isn’t theirs. It applies whether that person is paid staff or a volunteer.

Where it lives: Fidelity coverage is most commonly carried as an endorsement or rider attached to the master insurance policy — which is why the master insurance declaration is where a lender looks to verify it’s in place. A standalone fidelity policy is also acceptable.

When it’s required: Fidelity insurance is required for projects going through Full Review when the project has more than 10 units. Projects with 10 or fewer units qualifying for Fannie Mae’s Waiver of Project Review are exempt from the fidelity requirement entirely. As of August 3, 2026, with Limited Review eliminated, projects with more than 10 units now go through Full Review — and fidelity insurance is part of that review.

How much coverage is required: Three months of total assessments collected from all units, plus the full amount currently held in reserves. If an association collects $20,000 per month and holds $300,000 in reserves, the fidelity policy needs to cover at least $360,000. As reserves grow, the required coverage grows with them. An outdated policy that no longer reflects current reserve balances is a compliance problem waiting to surface.

The management company wrinkle: If a professional management company handles the association’s funds, Fannie Mae expects the management company to carry its own separate fidelity policy — and the association must still carry its own. The management company’s policy does not satisfy the association’s requirement. Both need to be in place, and both cover different things.

Why it matters in a transaction: Missing fidelity insurance doesn’t affect the physical condition of the building. But it can still make a project non-warrantable — meaning no conventional financing for any unit until it’s resolved. The good news is fidelity insurance is relatively straightforward to obtain once the gap is identified. The bad news is nobody notices it’s missing until a lender’s condo review flags it mid-transaction, and not every board moves at the speed of a real estate closing.

What About Small Condos? The Rules Don’t Change.

This is where the most confusion — and the most damage — happens in New Hampshire.

A lot of people assume that a small condo is simpler. Two units, informal association, no management company. Surely the insurance rules are more relaxed, right?

Wrong. The master insurance requirement applies to every condominium project in the country, regardless of size. A 2-unit condex has to have a master policy. A 4-unit condo has to have a master policy. There is no size threshold below which the requirement disappears.

And here’s the part that matters in New Hampshire specifically: we have a lot of small condos. Two-unit condexes are common throughout the state. Many of them were created years ago, sometimes informally, and a lot of them have never had a master insurance policy in place. Each owner just has their own homeowner’s policy. It feels like enough — until someone tries to buy one of those units with a mortgage.

The Fannie Mae Waiver of Project Review (expanded to 10 units or fewer in March 2026) does offer some relief for smaller projects — simplified review, no fidelity insurance requirement, no general liability requirement. But the master property insurance requirement itself remains. A small project still needs a compliant master policy.

Site Condos: It Depends on the Documents

A site condo is a property that looks and feels like a single-family home. It sits on its own lot. It has its own roof. It doesn’t share walls with anyone. But on paper — legally — it’s a condominium. And that legal label is what drives the insurance conversation.

There isn’t one universal answer for how site condos need to be insured. The answer lives in the declaration and bylaws.

In some site condo declarations, the association takes responsibility for the entire structure — roof, walls, foundation — and a master policy covers it all, just like a traditional condo building. In others, each unit owner owns their structure outright and carries their own homeowner’s policy, while the master policy covers only shared common elements like roads or a clubhouse. Both structures can be valid. The documents tell you which one applies.

Fannie Mae’s master insurance requirements apply to detached condos just as they do to any other condominium project — but what the master policy needs to cover depends on what the governing documents require. The lender still has to verify that the coverage is complete. “Complete” is defined by the documents.

FHA takes a cleaner approach: if a site condo is fully detached with no shared walls, shared roof, or shared structural components, FHA allows individual unit policies to substitute for a master policy entirely. It’s the one situation in condo financing where no master policy is required.

For site condos, the starting point is always the declaration and bylaws — not an assumption about what the insurance should look like.

Fannie Mae vs. Freddie Mac

Freddie Mac’s requirements mirror Fannie Mae’s in most respects. Freddie Mac issued Bulletin 2026-C on the same day as LL-2026-03, aligning the two agencies on deductible limits, reserve requirements, and review changes.

Freddie Mac holds the same 5% deductible limit — but allows one narrow exception worth knowing about. If the excess deductible is tied to a named-peril, per-unit deductible specific to a geographic area — such as wind coverage in a coastal zone — Freddie Mac may still accept the loan if the borrower’s HO-6 policy covers those same perils, covers any special assessments resulting from a claim, and carries enough coverage to cover the borrower’s per-unit share of the amount over the 5% cap. It’s a narrow exception with real practical limits. But it’s a real option in the right situation.

FHA Requirements

FHA requires a master or blanket hazard insurance policy for all condominium projects — including 2-unit condos — as part of FHA condo project approval.

The only exception is a site condominium — a project where the units are fully detached with no shared structural components. In that specific situation, each owner may insure their own unit individually. But if there’s any shared wall, shared roof, or shared foundation, that exception does not apply.

The Bottom Line

The master insurance policy is the foundation of your condo’s financial protection — and it directly affects your mortgage eligibility, your personal insurance needs, and your exposure to unexpected costs. Understanding it isn’t just good practice. It’s essential to making an informed decision when buying a condo.

If you’re a buyer in New Hampshire, make reviewing the master policy — along with the reserve study and HOA financials — a standard part of your due diligence. If you’re a real estate agent or lender, knowing these details before your client goes under contract can prevent a lot of painful surprises at the closing table.

Questions about how a condo’s insurance affects your financing options? As an independent mortgage broker licensed in New Hampshire, I’m happy to walk you through it.
I am not a licensed insurance agent.  The information provided comes from my understanding of lending requirements for condos.

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