Q: Our homeowners association (HOA) is requiring that each owner buy insurance for damage caused by their unit to the common areas of the association and to neighbors’ units.

In particular, the concern is water damage and other “perils.” I have received conflicting advice from some people. One person told me that they can’t issue this kind of coverage unless the insurance company rules there is negligence that caused the damage. And then, if it’s negligence, they can’t possibly insure the unit owner for that.

I am truly confused. I read your columns and thought you might weigh in.

A: Without getting into the nitty-gritty of insurance, we think that your association is correct to make sure that all unit owners have enough homeowners insurance to cover their units and any damage caused to other units or the common areas of the property by anything that happens inside your walls, ceiling and floor.

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Let’s say you’re making fried chicken one day and wind up with a small grease fire in your unit. The damage spreads through your unit and breaks through the wall into your neighbor’s unit. In addition, there’s smoke damage to the hallway. Your homeowners association wants to make sure you have adequate insurance to repair the damage within your unit and the neighbor’s unit and to clean up the smoke damage caused to the common area. That’s completely reasonable when living in a multifamily property.

Another clear example is if a toilet in your unit leaks into the unit below yours, and the damage will cost $2,500 to repair. We'd assume that you were somehow at fault (because your toilet leaked) and your downstairs neighbor would be right to want you to pay for the damage. Your homeowners insurance should pay for that damage.

Where it starts to get confusing is when something happens (let’s say a pipe bursts between units) but you are not so clearly at fault. Your insurance company should cover damage in your unit but may say that the neighbor’s insurance should cover the neighbor’s losses. We’re not going to get into the details of how and why the insurance companies may handle this. The important thing to know is that when all unit owners have adequate homeowners insurance, there will be adequate coverage to ensure that common areas of the property are protected and that the property’s insurance coverage won’t wind up being responsible for repairs made within units.

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Many associations will repair common areas and some parts of units when the damage is caused by common-area problems (a leak from an air-conditioning unit on the roof, for example), but the association doesn’t want to buy enough insurance to pay for damage to TVs, clothing, wallpaper, carpeting or anything else within a unit. That’s typically unaffordable (without having a huge assessment). Instead, the homeowners association wants the owner’s own policy to cover the individual’s unit.

When it comes to homeowners associations and the property insurance coverage, the association’s policy will typically only cover common areas and items specifically required under the homeowners association documents. If the issue is between homeowners and one owner is clearly at fault, that homeowner’s insurance will have to pay. Where there is no clear fault, the insurance companies typically work it out. (We say “typically” because there are always exceptions.)

The bottom line is that the requirement for each unit owner to have insurance is a good one, and your insurance agent should be able to get you coverage for both your contents and liability. Be sure to shop around for the best pricing.

Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.

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