Back to Basics: Let Your CC&Rs Be the Insurance Blueprint
By Pamella De Armas, CIRMS, Silicon Beach Insurance

When it comes to HOA insurance, one size definitely does not fit all. Every community is unique—and so is every set of CC&Rs (Covenants, Conditions & Restrictions). It’s easy to get caught up in generalizations or what neighboring associations are doing, but when you go back to basics, it all starts with the CC&Rs.

Start with the Governing Documents

Your CC&Rs are the foundation for determining what the HOA is required to insure. These documents outline what parts of the property fall under association coverage—whether it’s a “bare walls” policy, “walls-in,” or full replacement. A bare walls policy usually covers the structure up to, but not including, interior finishes. A walls-inpolicy may cover cabinets, flooring, and fixtures inside the unit. Understanding this matters, because if the CC&Rs specify bare walls, that’s your starting point—and owners are expected to insure the rest.

HOA vs. Owner Insurance Responsibilities

A common point of confusion is where HOA coverage ends and individual unit owner responsibility begins.

In general:

• The HOA insures common areas and building structures (as required by the CC&Rs), and typically carries general liability, Directors & Officers liability, fidelity/crime, and workers’ comp (even with no employees) and sometimes umbrella liability.
• The unit owner is responsible for insuring what the CC&Rs exclude—usually personal property, betterments & improvements, and personal liability.

For example, in a “bare walls” association, owners need an HO-6 policy that includes interior coverage from the drywall in. Without it, they could face significant out-of-pocket costs after a claim. Clear communication between the board and homeowners about these roles prevents major headaches.

Should HOAs Go Beyond the CC&Rs?

This is the million-dollar question! If your CC&Rs call for “bare walls” coverage, should the board stop there? Legally, maybe. But practically? Probably not.

Many CC&Rs are outdated, with vague language that doesn’t reflect today’s insurance practices. That lack of clarity becomes a problem when a claim happens. If the CC&Rs don’t clearly spell out who insures what, adjusters will default to the HOA’s policy. If the association hasn’t clearly transferred the risk to the individual unit owner, that risk remains the HOA’s to insure.

We strongly recommend boards update the insurance section of the CC&Rs. The revised language should mandate unit owners carry HO-6 policies and are responsible for insuring their interiors, contents, loss of use, and personal liability. The CC&Rs should list specific components—like cabinets, flooring, appliances, and paint—to eliminate confusion. When the CC&Rs are vague, claims are delayed, disputes arise, and financial responsibility gets murky. When they’re clear, everyone understands their role, and things go a lot smoother. Updating your CC&Rs might seem optional, but in today’s insurance environment, it’s not. Boards that take the time to modernize their documents protect the association’s financial health and help avoid major issues when a loss happens.

Let’s Talk Deductibles

Deductibles are another important topic that often get overlooked. If a claim impacts only one or two units, and the HOA has a $25,000 or $100,000 deductible (which is increasingly common), who pays? This should be addressed in the CC&Rs. Many associations have a deductible allocation policy that spells out responsibility based on where the damage originated and how many units are involved.

Another issue we see is deductibles that are too low—like $2,500 or $5,000. We typically recommend a $10,000 deductible or higher. Think about it: if the board wouldn’t file a claim for that amount, why pay higher premiums for a deductible that’s too low to use? Many carriers are moving to $10,000 as the new standard, and higher deductibles help lower premiums and discourage frequent, small claims that can drive up rates. Boards should ask: Is our deductible appropriate for today’s market? And do our documents clearly define who’s responsible when there’s a claim?

The Case for Earthquake Insurance

Earthquake insurance isn’t usually required by the CC&Rs—but it deserves serious consideration, especially in California. This is a critical issue for all unit owners. One way or another, if there’s an earthquake, there will be a special assessment. The only question is how big it will be—and that depends on whether the HOA has earthquake coverage. Many condo owners assume they’re covered because the HOA has insurance. But earthquake is excludedfrom standard policies and must be purchased separately, either as a standalone or a DIC (Difference in Conditions) policy.

If the HOA does carry earthquake insurance, it typically covers damage to the common areas and building structures, helping to offset potential special assessments. However, those policies often carry high deductibles—10% to 20% of the insured value per building—which can still result in substantial owner assessments.

If the HOA does not carry earthquake insurance, the cost to rebuild could fall entirely on the homeowners. That kind of assessment could be financially devastating.

We also recommend unit owners consider personal earthquake policies. These can help cover assessments, personal property losses, and temporary housing—providing a safety net even if the HOA has some coverage.

Boards should weigh the premium cost against the risk of catastrophic loss. This isn’t just about compliance—it’s about protecting the community’s financial future.

Final Thoughts

Going back to basics doesn’t mean sticking with outdated practices. It means using your CC&Rs as a foundation, and then thoughtfully updating what no longer serves the community.

Boards should regularly review their CC&Rs and ask:

• Are we in compliance?
• Are we protecting the HOA and our owners?
• Do homeowners understand their insurance responsibilities?

It’s not just about policies—it’s about protecting property, reducing confusion, and ensuring long-term peace of mind for everyone in the community. 😊

Pamella De Armas is a California-licensed insurance agent with the CIRMS designation. She specializes in Community Association risk management. She assists community association boards by providing education, reviewing governing documents, and helping find the right insurance solutions to protect their properties and members. Pamella can be reached at pam@siliconbeachinsurance.net.