A condo master insurance policy is the coverage the HOA buys to insure the building structure and common areas on behalf of every owner. It is funded through the dues, and it is one of the first things a lender checks when deciding whether a condo is warrantable. If the master policy falls short of Fannie Mae's standards, conventional financing on any unit in the building can stall or collapse, no matter how strong the borrower is.
For a lender or an agent working a condo deal, the master policy is not a closing-week detail. The coverage the association is required to carry is written into the governing documents, which means you can read for the risk before the declarations page ever arrives. Here is what the policy covers, what underwriting looks for, and where the gaps land on the buyer.
The short version
- A condo master insurance policy covers the building structure and common areas. The owner's HO-6 covers everything inside the unit.
- Fannie Mae requires property coverage at 100% of replacement cost, settled on a replacement-cost basis, with a deductible no higher than 5% of the coverage amount.
- Actual-cash-value, lapsed, or underinsured coverage is a warrantability flag that can block conventional financing on the whole building.
- The association's insurance obligations are set in the CC&Rs or bylaws insurance article. That is the first place to read the risk.
What a condo master insurance policy covers
The master policy insures what the association owns and controls: the exterior structure, the roof, the foundation, hallways, elevators, lobbies, and shared systems like the plumbing and electrical that serve more than one unit. It also carries general liability for injuries that happen in common areas.
How far the coverage reaches inside a unit depends on which of three master policy types the association carries:
- Bare walls. Covers the structure and common areas only. Everything from the interior wall surfaces in is the owner's responsibility, including flooring, cabinets, and fixtures.
- Single entity. Covers the original finishes the unit had when it was built. Later upgrades are on the owner.
- All-in. The broadest. Covers the unit's built-in fixtures and finishes, leaving the owner responsible mainly for personal belongings.
The type matters because it defines exactly where the master policy stops and the owner's own coverage has to begin. A bare-walls building puts far more on the individual unit owner than an all-in building does. None of the three types cover personal property, interior liability, or, in most cases, loss assessments. That is what the owner's HO-6 policy is for.
What lenders check for warrantability
Underwriting does not just confirm that a master policy exists. It confirms the policy meets agency standards. For a condo to be warrantable under Fannie Mae, the master policy generally has to clear several bars at once.
Per Fannie Mae's Selling Guide, the property coverage must equal at least 100% of the replacement cost of the project improvements, and claims must settle on a replacement-cost basis. A policy that settles on an actual-cash-value basis, which subtracts depreciation, is not acceptable. The maximum deductible is 5% of the coverage amount.
On top of the property policy, Fannie Mae requires general liability coverage of at least $1 million per occurrence, and fidelity or crime coverage for projects with more than 20 units to protect association funds against theft or mismanagement.
Agency standards have tightened through 2026, and insurance is now one of the more common reasons a condo file gets flagged. A master policy that was fine two years ago can be underinsured today after a premium spike pushed the association to cut coverage or raise the deductible past the cap.
Where the insurance requirement lives in the governing documents
Here is the part most warrantability guides skip. The association's insurance obligations are not invented by the insurance carrier. They are written into the CC&Rs or the bylaws, usually in an article titled "Insurance." That article states what the association is required to carry: the property coverage, the liability limits, the fidelity bond, and how deductibles and loss assessments are allocated between the association and the owners.
That gives you two documents to reconcile, and both matter:
- The governing documents tell you what the HOA is obligated to carry.
- The declarations page or insurance certificate tells you what it actually carries right now.
When those two disagree, or when the governing documents set a coverage floor the current policy does not meet, that is a live risk. Reading the insurance article early tells you what should be on the declarations page before you request it, so you know whether the actual policy is a match or a shortfall.
The HO-6 gap and who pays the deductible
The master policy leaves a defined gap, and the owner fills it with an HO-6, sometimes called walls-in coverage. The HO-6 covers personal property, interior finishes and upgrades, personal liability, and loss assessments the association passes through.
The piece that surprises buyers is the deductible passthrough. When a covered loss originates in or affects a single unit, many governing documents allow the association to charge the master policy deductible back to that unit's owner. With master deductibles running high, that can be a five-figure obligation landing on one owner after a claim. A well-written HO-6 can cover the passed-through deductible, but only if the owner knows to ask for it, and the amount to insure comes straight from the governing documents.
For a lender, the takeaway is narrower: confirm the borrower carries an adequate HO-6, and confirm the master policy itself clears the agency bars. For an agent or buyer, the HO-6 gap is the difference between a covered loss and a surprise bill.
Insurance red flags that make a condo non-warrantable
A few patterns reliably turn up on the files that stall. Watch for:
- Actual-cash-value settlement. Depreciation-based payouts fail the replacement-cost standard outright.
- Coverage below 100% of replacement cost. Common after a reappraisal or a premium-driven coverage cut.
- A deductible above the 5% cap. Increasingly common as associations trade higher deductibles for lower premiums.
- No fidelity or crime coverage on a project over 20 units.
- A lapsed or expired master policy, or a policy in a coverage gap between carriers.
- A blanket policy shared across multiple associations without clearly allocated, adequate per-project limits.
Insurance rarely travels alone on a troubled file. It often shows up next to thin reserves or active litigation. If the insurance picture looks weak, the rest of the warrantability review usually deserves a closer look too. For the full picture of what pushes a condo out of conventional financing, see our guide to the non-warrantable condo flag.
How ClearHOA reads this for you
ClearHOA reads the insurance article in any CC&R, bylaws document, or HOA rules packet and pulls out what the association is required to carry: property coverage standards, liability limits, the fidelity bond, and how deductibles and loss assessments are allocated between the HOA and owners. It runs on the governing documents you already have and returns a plain-English report in under 90 seconds, with the section references so you can point underwriting straight to the source language. It reads the obligation. You still confirm the current declarations page against it.
Frequently asked questions
What does a condo master insurance policy cover?
The master policy covers the building structure, the roof, the foundation, common areas like hallways and lobbies, shared systems that serve more than one unit, and general liability for injuries in common spaces. Depending on the policy type, it may also cover original interior finishes. It does not cover personal property or the inside of a unit beyond that.
What is the difference between the master policy and an HO-6?
The master policy is the association's coverage on the building and common areas. The HO-6 is the owner's individual policy covering the unit interior, personal belongings, personal liability, and loss assessments. The master policy stops where the HO-6 begins, and exactly where that line falls depends on whether the master policy is bare-walls, single-entity, or all-in.
Can you get a mortgage on a condo without adequate master insurance?
Not a conventional one. If the master policy is missing, lapsed, or below Fannie Mae and Freddie Mac standards, the project is non-warrantable, and no conventional mortgage can be backed on any unit in it. Buyers are left with cash or portfolio loans that usually carry higher rates and larger down payments.
Who pays for the condo master insurance policy?
The association pays the premium directly, and it is funded through owner dues. Every owner pays a share through their monthly assessment. After a covered loss, an owner may also owe the master policy deductible if the governing documents allow the association to pass it through to the affected unit.
What happens if the HOA's master policy lapses?
A lapse makes the project non-warrantable until coverage is restored, which can freeze every pending sale and refinance in the building. It also exposes owners directly: a major loss during a lapse may become a special assessment spread across the membership. Confirming the policy is active and adequate is a standard part of the warrantability review.
If you are underwriting a condo file, run the governing documents through ClearHOA before you order the master policy declarations. You will have the association's required coverage, liability limits, fidelity bond, and deductible allocation pulled with source citations in under 90 seconds, so you know what the declarations page should show before it lands and where the file is exposed if it does not.