HOA Insurance in Colorado: Why Your HO-6 Loss Assessment Coverage Matters

Important Insurance Tip for HOA Homeowners in Colorado

Colorado homeowners living in HOA communities face unique insurance considerations, especially given our frequent hail and wind storms. One issue I see come up regularly, and one that can have a real financial impact, involves how HOA master insurance policies and individual homeowner policies work together.

Understanding the HOA Master Policy

In many HOA communities, the master insurance policy covers the exterior of the buildings. This policy is typically evidenced by a Certificate of Liability Insurance and is often reviewed by lenders during the financing process.

For these communities, it is critical that the master policy maintains a wind or hail deductible of 5% or less. This threshold is commonly required by lenders. If the deductible exceeds 5%, the property can be considered non-warrantable, which may limit buyer financing options and negatively impact resale value.

The Hidden Tradeoff of a 5% Deductible

Many HOAs work hard to keep their hail deductible at or below 5%, which is good news for financing. However, the tradeoff is that the dollar amount of that deductible can be extremely high.

In the event of a major hail storm requiring roof replacement, the HOA is typically responsible for paying the master policy deductible. That cost is often passed on to homeowners in the form of a special assessment.

Why Your HO6 Policy Matters

This is where your HO6 (walls-in) insurance policy becomes extremely important.

Homeowners should review the loss assessment coverage on their HO6 policy. Increasing this coverage to around $50,000 often costs only $100–$150 per year, depending on your insurance carrier.

How Loss Assessment Coverage Helps

If your community needs a new roof and the HOA’s master policy deductible is not fully met, homeowners may be responsible for paying their portion of the remaining cost.

With adequate loss assessment coverage on your HO6 policy, you would generally only be responsible for your HO6 deductible, which is often around $1,000. The policy would then cover the remaining balance of the assessment, potentially saving you tens of thousands of dollars.

This Is Happening Right Now

This scenario is not theoretical. It is currently happening in my own HOA community, which is why I am sharing this information with friends, family, and clients. A relatively small policy adjustment today could help prevent a significant out-of-pocket expense in the future.

A Practical Reminder

This is not insurance advice, but rather a practical recommendation based on what I am seeing locally in Colorado HOA communities. I strongly encourage homeowners to contact their insurance provider to review their HO6 policy and discuss whether increasing their loss assessment coverage makes sense for their situation.

Have questions about how HOA insurance impacts resale value or buyer financing?

I help homeowners and buyers navigate HOA communities across the Denver Metro area and Front Range. If you have questions about how HOA insurance, deductibles, or warrantability could affect your home’s value or a future sale, feel free to reach out anytime.

Disclaimer: This article is for informational purposes only and is not intended as insurance or legal advice. Insurance coverage varies by carrier and policy. Homeowners should consult directly with their insurance provider to review their individual coverage, limits, and options.