Glossary of HOA Insurance Terms


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Actual Cash Value

This is the cost of replacing damaged or destroyed property with comparable new property, less depreciation and obsolescence. For example, a 5-year-old carpet would not be replaced at the current fair market value because of depreciation.


A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.

Admitted Company

An insurance company licensed in the state in which the policy is purchased. Admitted carriers in the state of California must follow guidelines established by the California Department of Insurance. Admitted carriers are part of the California Insurance Guarantee Association (CIGA) which provides up to $500,000 in protection for policy holders should their insurance company fail.


A person who sells and services insurance policies. There are two types of Insurance Agents:

An Independent Insurance Agent represents at least two insurance companies and services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy.
A direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent. These agents are sometimes referred to as "captive agents" because they are unable to sell policies for any other company other than the one they represent. Examples are State Farm, Farmers and Allstate.

Aggregate Limit

Generally refers to liability insurance. It is the total amount of insurance coverage the insured has under the insurance policy, during the contract period, regardless of the number of claims.

Bare Walls Coverage

Exists when a condominium association’s master policy only provides coverage for the common area and stops at the drywall of each unit.

Blanket Deductible

A deductible that applies to all buildings or locations covered by a policy.

Boiler and Machinery Coverage

Covers losses resulting from the malfunction of boilers and machinery. This type of coverage is generally excluded from property insurance creating the need for this separate insurance product.


An insurance agent that researches the marketplace for the benefit of insureds, not insurance companies.

Broker of Record Letter

A written statement signed by an insured advising an insurance company that a specific broker or agent is acting as the insured’s exclusive representative.

Building Code and Ordinance Coverage

An additional line of protection that pays for items that must be added as part of the rebuilding process to bring the property up to current building codes.

Captive Agent

An agent of a single insurer or group of insurers who is legally obliged to submit business only to that company, or at the minimum, give the company first refusal rights. In exchange, the insurance company typically provides its captive agents with an allowance for office expenses and benefits such as pensions, health insurance, life insurance, and credit union memberships.


An event that causes major losses to many insureds simultaneously. Examples of these losses are hurricanes, earthquakes, and fires.


Covenants, Conditions and Restrictions or CC&Rs determine whether the unit owners or association are responsible for repairs, maintenance and reconstruction.

CIGA – California Insurance Guarantee Association

This is the state reinsurance program that protects insureds from insolvent admitted carriers for up to $500,000.

Coinsurance Requirements

A policy provision that requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss.

Coverage Amount

The amount of protection in dollars provided by an insurance company, towards the replacement of the insured’s property.

D&O Coverage

Directors and Officers Liability Coverage is the coverage that protects a board of directors from the errors they might make as officers of their association.


The amount that the insurance company deducts from a claim settlement. It is the amount the insured must pay. The deductible can either be a fixed dollar amount or a percentage of the insured’s loss.

DOI – Department of Insurance

The department of California’s government that regulates insurance companies that do business in California.

Earthquake Zone

An area that is designated as the zone most likely to be affected if an earthquake occurs along a fault located within the zone. There are many earthquake zones in California.


A written change to the policy that modifies the coverage.


Items or conditions that are not covered by the general insurance contract.


Measure of vulnerability to loss, usually expressed in dollars.

Extended Replacement Cost

This option includes inflation protection coverage.


A factor that increases the likelihood or probable severity of a loss. For example, storing gasoline in a garage is a hazard that increases the probability and probable severity of a loss.

Insurable Interest

An interest in property such that loss or destruction of the property would cause a financial loss.

Insurance Clause – CC&Rs

This section of the CC&Rs sets forth any requirements the association must follow in purchasing insurance coverage.

Insurance Disclosure Form

This is the form that must be provided to all unit owners on an annual basis in accordance with California laws.

Interior Betterments

These are the property components located within a condominium unit. Examples of interior betterments include wall and floor coverings, kitchen cabinets, and fixtures. Interior betterments are generally not covered by HOA master policies.

Liability Insurance

Insurance that pays on behalf of an insured for defined losses arising out of certain acts or failure to act imposed by law or assumed by contract.

Liquor Liability Coverage

Liability coverage that protects an association from lawsuits that might arise from the serving of alcohol in the common areas of the association.

Loss Assessment Coverage

This is coverage intended to protect condominium unit owners against special assessments caused by a loss as a result of perils covered in the association’s master policy.

Loss Runs

This is a written statement provided by an insurance company that sets forth exactly when, how much and what type of losses were incurred by the insured.

Master Policy

This is a policy that protects an association from most types of property losses and from general liability lawsuits. The precise scope of the coverage will vary from company to company.


Limiting the amount of total loss that occurs once an initial loss occurred. For example, once a plumbing leak is detected, shutting off the water.


An event that results in an insured loss.

Original Building Standard

The state of the interior at the time a building was constructed or converted to condominiums.


Something that can be the cause of a claim. In property insurance, perils are events such as earthquakes, hurricanes, and fires.

Replacement Cost

The cost of replacing insured property such as a building without taking into account depreciation.

Short-Rate Cancellation

When a policy is terminated prior to the expiration date at the policyholder’s request, the earned premium charged will be more than the pro-rata earned premium. Generally, the returned premium is approximately ninety percent of the pro-rata return premium. However, an insurance company may establish its own short-rate schedule.


An amount less than the full building value that is applied to specified areas of coverage. An example would be when a building is insured for $1,000,000 and there is a $25,000 limit for mold damage. The limitation for mold damage would be a sublimit.


Federal terrorism insurance coverage that was created after 9/11, to cover federally certified acts of terrorism.

Unit Interior Coverage

The insurance coverage that protects the improvements of a condominium from the drywall in.

Unit Owner Policy

The policy that a condominium unit owner purchases to provide coverage for those items that are not covered by the master policy. This is also referred to as an HO-6 policy in the insurance industry.