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Q & A With America’s Real Estate Professor: HOA Insurance Policy

Zillow • Sep 19, 2013 at 2:37 PM

HOA Insurance HO-6 Policy

Q. I am looking at my HOA documents to see if I can determine whether or not my HOA carries an HO-6 interior coverage insurance policy for me/each owner? Jennie Y., San Diego

A. The HO-6 policy protects you, the owner, for damage to the interior of your unit and for liability like fires or floods that you or your tenant causes. It only covers up to the stated coverage amounts in your policy declaration page. This is one policy that you pay for yourself. The HOA does not pay for these. You have to procure a policy each year whether you live there or if you rent out the unit to a tenant – that’s a Landlord HO-6 Policy. It costs about $250/year. But look closely at the liability coverage amount to make sure it’s enough for you and discuss it with your insurance agent.

Luckily, banks these days make a mortgage borrower have a policy in place. But many cash buyers or long-term owners don’t know about them or don’t see the need. But I caution, just wait until you or your tenant causes a fire that damages other units and you get sued to pay for their losses. Then you’ll understand why it’s vital to have a policy in effect.

You should get the master policy as well as other insurance policies that the HOA carries and discuss them with your personal insurance agent so they can see what is covered by the HOA and what coverage you need to fill in any gaps. It probably will just be an HO-6 and maybe an Umbrella Liability policy, but some townhome communities can have varying types of coverage and only your agent can help you sort out what you need to protect yourself.

Keeping a Tenant’s Security Deposit

Q. For the first time in 10 years, I’ve got a tenant that I’m not very happy with. Luckily, they are moving out, but they’ve done some damage to the property, like destroying window blinds, some holes in the wall, plus they smoked in a room that needs to be repainted. Is any documentation required before deducting security deposit from tenants? Lina N., Amarillo, Texas

A. Sorry to hear about this, but we’ve all had a bad tenant once in a while. Yes, you need to document why you are taking part of their security deposit. First do an inspection and give them written notice of the damage, so they have an opportunity to fix it themselves. You might also want to get some pricing to fix the issues and include that on your written note to them.

Although you may be mad about the situation, the worst thing you can do is start and/or drag out a disagreement with them. It’s only going to take up your time and be a hassle for you. So you need to put your unhappiness aside and treat them fairly. That will get them out faster with less hassle and you can get a good new tenant in and hopefully have 10 more years of good tenants.

Get some of those bids for the work – get fair bids – and act in a reasonable and professional manner in all your discussions with them. Lastly, make sure to comply with all the local laws related to timing and documentation related to returning the remainder of the security deposit.


Leonard Baron, MBA, is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions. He is a San Diego State University lecturer, blogs at Zillow, and loves kicking the tires of a good piece of dirt! More at ProfessorBaron.com. Email your questions to: Leonard@ProfessorBaron.com

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