There are standard questions that HOA boards and property managers should ask when reviewing an HOA property insurance policy. Earthquake coverage is one of those topics that is easy to overlook because it is usually not included in a standard property policy. In many cases, earthquake damage must be added by endorsement or purchased through a separate policy. Standard homeowners and business insurance policies generally do not cover earthquake damage, according to the NAIC.
At StarNet Insurance Group, we help associations review their HOA Property Insurance options so the board can understand what is covered, what is excluded, and what may need to be added based on the community’s location, buildings, governing documents, and budget. StarNet’s HOA Property Insurance page explains that a master policy generally protects buildings, common areas, and association-owned property, depending on how the governing documents define responsibility.
Quick Answer
Do you need HOA earthquake coverage?
You may need it if your association owns or is responsible for buildings, roofs, foundations, garages, clubhouses, retaining walls, or other common structures in an area with earthquake exposure. It is especially important for condominium and townhome associations because individual owners usually cannot insure the shared building structure by themselves.
What Is HOA Earthquake Coverage?
HOA earthquake coverage is insurance designed to help pay for direct physical damage caused by earthquake shaking. For an HOA, this may include damage to association-owned buildings, common structures, and shared property that the HOA is responsible for repairing.
This coverage is different from general HOA property insurance. A regular HOA master property policy may cover fire, wind, hail, vandalism, and other covered causes of loss, but earthquake damage is often excluded unless the association adds specific earthquake coverage.
Why Earthquake Coverage Matters for an HOA
An HOA has responsibilities that individual owners do not always control. For example, the association may be responsible for roofs, exterior walls, stairways, elevators, hallways, parking structures, clubhouses, pools, fences, and shared mechanical systems.
If an earthquake damages these areas and the HOA does not have earthquake coverage, the repair costs may have to come from reserves, special assessments, loans, or delayed repairs. In a larger community, that can become a financial problem very quickly.
Location of the Property
The first question is where the property is located. Some areas have a higher earthquake risk than others, but earthquake exposure is not limited to California. The U.S. Geological Survey uses national seismic hazard maps to help inform building codes and insurance rates, and those maps are updated as new science becomes available.
An HOA board should consider local fault activity, soil conditions, building age, construction type, and whether the property has parking garages, masonry, soft-story construction, or other structural features that could increase damage.
Type of Association
The type of community matters. Is the HOA responsible for detached homes, townhomes, condominiums, mixed-use buildings, or multi-building residential property?
A condominium association may need to think more seriously about earthquake coverage because the HOA master policy may be the only practical way to insure the shared structure. Condo unit owners may have HO-6 policies, but those policies usually focus on the owner’s personal property, interior improvements, loss of use, and loss assessment coverage—not the full shared building.
Governing Documents
The HOA’s declaration, bylaws, and CC&Rs should be reviewed before deciding whether to buy or decline earthquake coverage.
These documents may say what the association must insure, what owners must insure, and how special assessments are handled. They may also define whether the master policy should be “bare walls,” “walls-in,” or “all-in.” StarNet’s HOA Property Insurance page notes that matching coverage to governing documents helps reduce surprises at claim time.
Master Policy Limits
Earthquake coverage can change the limits the HOA needs to review. The board should know the replacement cost of the buildings and common property. This is not the same as market value.
For example, a building may have a market value based on location, sales activity, and land value. The insurance limit should focus on what it would cost to repair or rebuild covered property after a loss.
Deductible Structure
Earthquake deductibles are usually much higher than regular property deductibles. They are often written as a percentage of the coverage limit instead of a flat dollar amount. The NAIC explains that earthquake insurance deductibles are commonly 10% to 20% of the coverage limit, and some policies may have separate deductibles for different categories of property.
This is a major change for an HOA. A 10%, 15%, or 20% deductible on a large building can create a large out-of-pocket cost before the policy begins paying.
Special Assessments
If the HOA has a large earthquake deductible or not enough earthquake insurance, the board may need to assess unit owners after a loss.
This is why earthquake coverage should be discussed together with loss assessment planning. Condo unit earthquake policies may offer loss assessment coverage that helps owners pay their share of certain HOA assessments for earthquake repairs or a master policy deductible. The California Earthquake Authority explains that loss assessment coverage can help pay an owner’s share of certain HOA assessments for earthquake-damage repairs or a master-policy deductible.
Unit-Owner Coverage
HOA earthquake coverage does not replace the need for unit-owner coverage. Owners may still need their own policies for personal property, loss of use, interior improvements, and loss assessment.
For example, if an earthquake damages common areas and the HOA issues a special assessment, a unit owner may need loss assessment coverage on their own policy. If the unit becomes unlivable, the owner may also need loss of use or additional living expense coverage.
Ordinance or Law Coverage
After a major earthquake, repairs may need to meet current building codes. Older buildings may have to be upgraded during reconstruction.
This can change the cost of a claim. Ordinance or law coverage, sometimes called building code upgrade coverage, may help pay for added costs required by local building officials. CEA materials note that building code upgrade coverage may help with code-compliant rebuilding or repairs when local authorities require current-code work.
Reserves and Budget Planning
Earthquake coverage can change the HOA’s budget. Premiums may be higher, deductibles may be larger, and the board may need to plan reserves differently.
The board should compare the cost of coverage against the possible cost of not having coverage. This includes repair costs, deductible assessments, owner hardship, loan payments, and the effect on property values if damaged common areas cannot be repaired quickly.
Exclusions
All insurance policies have exclusions. Earthquake policies may not cover every type of damage that happens after an earthquake.
For example, the California Department of Insurance notes that earthquake insurance commonly excludes items such as fire, land, vehicles, and flood; fire may be handled by the homeowners policy, and flood or tsunami damage may require flood insurance.
The exact exclusions depend on the policy, carrier, and state. The board should ask the agent to explain what is covered and what is not covered before making a decision.
Claims Process
The claims process may also change. Earthquake claims can involve structural engineers, inspections, aftershock rules, and hidden damage.
The NAIC notes that some policies treat earthquake events within a 72-hour period as one event with one claim and one set of deductibles, but the time period can vary by policy.
The HOA should understand how quickly damage must be reported, who can authorize emergency repairs, and what documentation the carrier will need.
Board Decision-Making
The board does not have to make this decision based only on premium. A good review should include:
Property location
Building age
Construction type
Soil and foundation concerns
Replacement cost
Current master policy exclusions
Deductible options
Reserve strength
Special assessment authority
Owner insurance expectations
Governing document requirements
This helps the board decide whether earthquake coverage is necessary, optional, or something to revisit at renewal.
When an HOA Should Strongly Consider Earthquake Coverage
An HOA should strongly consider earthquake coverage when the community is in a known seismic area, owns multi-unit buildings, has older construction, has limited reserves, or would need to assess owners heavily after a major loss.
The coverage may also be important when individual owners cannot realistically protect the shared building structure on their own.
When an HOA May Decide Against It
Some associations may decide not to purchase earthquake coverage because of cost, high deductibles, low perceived earthquake risk, or budget limitations.
However, that decision should be documented carefully. The board should understand the financial consequence of an uninsured earthquake loss and communicate clearly with owners about what the master policy does and does not cover.
Questions to Ask Before Buying HOA Earthquake Coverage
What property would be covered?
What property would be excluded?
Is the deductible per building or per occurrence?
Is the deductible based on total insured value or damaged property value?
Are parking structures, garages, pools, fences, retaining walls, and clubhouses included?
Does the policy include ordinance or law coverage?
How would the deductible be funded?
Could owners be specially assessed?
Do owners need earthquake loss assessment coverage on their own policies?
Does the coverage match the HOA’s governing documents?
Final Thoughts
HOA earthquake coverage is not just an insurance question. It is also a budget, reserves, governing documents, and homeowner communication question.
At StarNet Insurance Group, we’re here to help HOA boards and property managers review the details of their HOA property insurance so the association can make a more informed decision. If your community is reviewing earthquake coverage, deductible options, or master policy gaps, please contact us with any questions.
To schedule a consultation, please call StarNet Insurance Group at (312) 445-7777.
