Introduction to the HO-6 Unit-Owners Form
The HO-6 Unit-Owners Form is specifically designed for the unique needs of condominium unit owners and residents of cooperative apartments. Unlike a standard homeowner who owns the entire structure and the land it sits on, a condo owner typically owns only the interior of their individual unit. For the complete Personal Lines exam guide, it is essential to understand that the HO-6 is a 'named perils' policy that fills the gap between the building owner's master policy and the individual’s personal assets.
Because the condominium association (the collective of owners) usually maintains insurance for the building's exterior and common areas (like lobbies and elevators), the HO-6 focuses on the 'walls-in' exposures. This includes the individual's personal property, personal liability, and specific improvements made to the unit.
Comparison: HO-3 vs. HO-6 Coverage
| Feature | HO-3 (Special Form) | HO-6 (Unit-Owners Form) |
|---|---|---|
| Primary Dwelling (Cov A) | Full replacement of structure | Walls-in / Interior finishes |
| Other Structures (Cov B) | 10% of Coverage A | Usually N/A (included in A if any) |
| Personal Property (Cov C) | 50% of Coverage A | Set by policyholder (Primary limit) |
| Loss Assessment | Limited / Optional | Standard ($1,000 baseline) |
Coverage A: The 'Walls-In' Concept
In the HO-6 form, Coverage A (Dwelling) does not cover the entire building. Instead, it covers the parts of the structure that the unit owner is responsible for under the association's bylaws. This typically includes:
- Alterations, appliances, fixtures, and improvements that are part of the building within the residence premises.
- Items of real property that pertain exclusively to the residence premises.
- Property which is the responsibility of the insured under the association agreement.
On the practice Personal Lines questions, you may see scenarios involving kitchen renovations or floor upgrades. These are covered under Coverage A of the HO-6. It is important to note that Coverage A is written on a named perils basis in the standard HO-6 form, although it can be endorsed to 'open perils' in many markets.
Master Policy Coordination
The HO-6 works in tandem with the Condominium Association Master Policy. There are two main types of master policies: Bare Walls (covers only the structure up to the drywall) and All-In (covers original fixtures like cabinets and flooring). The unit owner must tailor their Coverage A limit to account for what the master policy excludes.
Coverage C, D, and Liability
While Coverage A is unique in the HO-6, the other sections mirror the standard homeowners forms:
- Coverage C (Personal Property): Covers the insured's belongings (furniture, clothes, electronics) anywhere in the world. Like the HO-2 and HO-3, this is a named perils coverage.
- Coverage D (Loss of Use): Provides for Additional Living Expenses (ALE) and Fair Rental Value if the unit becomes uninhabitable due to a covered peril.
- Coverage E (Personal Liability): Protects the insured against claims for bodily injury or property damage to others for which the insured is legally liable.
- Coverage F (Medical Payments to Others): Pays for minor medical expenses for guests injured on the premises, regardless of fault.
HO-6 Perils and Limits At-a-Glance
The Importance of Loss Assessment Coverage
One of the most critical aspects of the HO-6 for the Personal Lines exam is Loss Assessment Coverage. Condominium associations may levy special assessments against all unit owners to pay for common area losses. This happens when:
- A covered peril damages common property (like the roof or lobby) and the master policy limit is exhausted.
- The association suffers a massive liability loss (e.g., someone drowns in the community pool) and the master policy is insufficient.
- The association has a high deductible that must be shared among all owners.
The standard HO-6 includes $1,000 of Loss Assessment coverage. This limit can be increased by endorsement. However, the policy will not pay for assessments charged by a government body or assessments resulting from a loss that is not a 'covered peril' under the HO-6 (such as a flood assessment, unless a flood endorsement is present).