Master Insurance: Why It Matters

When buying a condo, one of the most overlooked — and most important — factors is the master insurance policy.

A buyer can be fully qualified.
The unit can appraise.
The offer can be strong.

👉 But if the condo association’s insurance doesn’t meet lending guidelines, the loan may not close.

What Is a Master Insurance Policy?

  • A policy carried by the condo association
  • Covers the building and common areas
  • Paid through monthly condo dues
  • The HOA is the named insured

👉 Your personal policy (HO-6) covers your belongings and certain interior items
👉 The master policy covers the building itself

Why Lenders Care

  • Lenders aren’t just lending on one unit
  • They’re lending on the entire condo project

👉 If the building isn’t properly insured, the loan is at risk
👉 That’s why every lender reviews the master policy

Where Problems Happen

Deductibles

  • Must generally be 5% or less of total coverage
  • If too high → financing can be denied

Replacement Cost

  • Buildings must be insured for full rebuild cost
  • Not market value

Roof Coverage (2026 update)

  • Can now be insured at depreciated value (ACV)
  • May lead to special assessments if there’s a shortfall

What Buyers Often Don’t Realize

  • The HOA pays the deductible first
  • If reserves are low → owners may be assessed
  • Your HO-6 may need to cover that

👉 This is where loss assessment coverage becomes critical

Other Required Coverage

General Liability

  • Covers injuries in common areas
  • Example: slip and fall, accidents, property damage

Fidelity Insurance

  • Protects association funds
  • Covers theft or misuse of HOA money

Important Note for Small Condos

  • Even 2-unit condos typically need a master policy
  • There is no automatic exemption for small projects

Bottom Line

  • Master insurance protects the building
  • Fidelity insurance protects the money
  • Both are reviewed during condo financing

👉 And both can determine whether a deal closes

Want the Full Breakdown?

This is just the surface.

If you want a deeper understanding — including:

  • HO-6 requirements
  • Per-unit deductibles
  • The “double deductible” problem
  • Real-world risk scenarios

👉 I’ve put together a complete guide – just click here to get more detailed info

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