Small Condo Association Insurance in Massachusetts (2 to 10 Units)

By Jonathan Merwin, Founder and CEO, Licensed Insurance Advisor

A two-unit condex in Salem. A three-unit Victorian in Newburyport with a shared slate roof. Four townhouse units off a private lane in Hingham, or a brick row house in Brookline split into five flats. Most Massachusetts condominiums of this size have no management company. The trustees are usually the owners themselves, and the insurance decisions land on whoever volunteered to be treasurer.

This page is for those owners and trustees: small associations of roughly two to ten units that manage themselves. We wrote it after working with a two-unit Salem association that needed a master policy in its own name for the first time, and it covers the questions that come up most in buildings this size. For larger associations and the full picture of Massachusetts master policies, see our Massachusetts condo association insurance guide. If you own a single unit in a two-family condex and want to understand your own policy, start with condex insurance in Massachusetts.

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Why small associations get insurance wrong

Large associations have a property manager, an annual budget meeting and an insurance agent who knows the building. Small associations often have none of those. What we see instead:

• No master policy at all. Each owner insures “their half” on a homeowners policy and nobody insures the shared roof, foundation or stairs in the association’s name. That only works if the documents allow it and both policies are written to fit together.
• A policy in the wrong name. The master policy was set up years ago in one owner’s name, or in the developer’s name, and never moved to the condominium trust.
• A limit that hasn’t moved. The building limit was set at the conversion and never updated, while rebuild costs for old wood-frame houses kept climbing.
• Nobody knows the deductible. The master policy has a deductible that no owner’s HO-6 policy was set up to absorb.
• No liability for the trustees. The volunteers who sign contracts, collect assessments and decide on repairs have no directors and officers coverage.

None of these are hard to fix. They usually come to light when a unit sells and the buyer’s lender asks for the master policy declarations page, or when a pipe freezes and two owners and two carriers start arguing about whose policy pays.

What Chapter 183A says, and what it leaves to your documents

Massachusetts condominiums are created under Chapter 183A of the General Laws. On insurance, the statute does less than most owners expect:

• Section 10(b)(3) gives the association the power to obtain insurance on the common areas and facilities, written in its own name, “without prejudice to the right of each unit owner to insure his own unit for his own benefit.” It’s a power, not a detailed mandate.
• Section 10(c) lets a condominium be self-managed by its elected trustees or managing board, and requires the association to keep all current insurance policies with its records, available to owners and first mortgagees.
• Section 10(h) requires blanket fidelity insurance, of at least one-fourth of the annual assessments, for condominiums of more than ten units. Section 10(m) lets owners modify that requirement by a 67% vote after the developer turns over control.
• Section 13 sends claims about the common areas to the association. If common funds run out, individual owners can be liable for the balance in proportion to their percentage interest (§ 13).
• Section 17 covers rebuilding after a casualty. Damage of 10% or less of the building’s value is repaired as a common expense. Above that, if 75% of owners don’t agree to rebuild within 120 days, the condominium can become subject to partition (§ 17).

So the real rules for your building are in the recorded master deed and the by-laws or declaration of trust. Those documents usually say whether the trustees must carry a master policy, whether it covers the whole building or only the common areas, whether it must be written at replacement cost, who pays the deductible and how insurance money is used after a loss. If you haven’t read them since the closing, start there. We’re happy to read them with you.

Section 13 is worth a second look in a small building. In a ten-unit association, a liability claim that exhausts the policy limit is shared ten ways. In a two-unit condex it’s shared two ways. A small association’s liability limit and any umbrella above it deserve as much thought as the building limit.

Bare walls, single entity or all-in: how far the master policy reaches

Every master policy has to line up with the unit boundaries in the master deed. In practice there are three common setups:

• Bare walls. The master policy covers the structure and common areas and stops at the unit’s interior surfaces. Each owner’s HO-6 covers cabinets, flooring, fixtures and anything inside.
• Single entity. The master policy covers the building and the original interior finishes as built or converted. Each owner covers improvements they’ve made since, plus their belongings.
• All-in. The master policy covers the building, original finishes and owner improvements. Each owner’s policy mainly covers belongings, liability and the deductible.

In a small conversion, the line can be blurry. A two-family condex might have each owner responsible for “their” windows, porch or heating system. Whatever the documents say, the master policy and every owner’s HO-6 need to agree on it, or a claim can fall between them. For the unit owner’s side, see our Massachusetts condex insurance page.

The master policy deductible and loss assessment

In small associations, the deductible is where most fights start. A burst pipe on the third floor of a three-unit building damages all three units. The master policy pays above its deductible, and somebody has to pay the deductible itself.

Many by-laws assign the deductible to the owner whose unit caused the loss, or split it among the damaged units in proportion to their damage. Some are silent, which leaves the trustees to decide in the middle of a claim. If yours are silent, it’s worth adopting a clear rule now, with legal advice, so every owner knows where they stand.

Then each owner can match their own policy to it. Most HO-6 policies offer loss assessment coverage, which can pay an owner’s share of an association assessment after a covered loss, including, on many forms, a share of the master deductible. The default limit is often low. We usually suggest each owner set it with the master deductible in mind.

In a two- or three-unit association, every owner is a trustee, every claim is personal and the documents matter more than the policy.

What a small association’s master policy usually includes

For Massachusetts condominium associations, we place master policies with Safety Insurance, Concord Group, Vermont Mutual, Andover Companies and Providence Mutual. Which one fits depends on the building’s age, construction, location, unit count and claim history. A typical package for a small association includes:

• Building coverage at replacement cost, with a limit based on what it would cost to rebuild, not the assessed value or the sum of unit sale prices.
• General liability for the common areas: walks, driveways, stairs, decks and the shared yard.
• Building ordinance or law coverage for older buildings that would have to be rebuilt to current code.
• Equipment breakdown for shared boilers or electrical service, where the carrier offers it.
• Directors and officers (D&O) liability for the trustees’ decisions, either as part of the package or alongside it.
• Fidelity or crime coverage for the association’s money. Required by statute only above ten units, but even a two-unit association has a bank account and a reserve.

Carriers look at the year built, roof age and material, heating type, electrical service, plumbing updates, whether any unit is rented out or used as a short-term rental, any commercial use in the building, protection class and distance to the coast, and five years of losses.

Old houses, ice dams and water: the Massachusetts claims we see

Small associations in Massachusetts are often in old houses. Many were built before 1940 as single-families or two-families, then converted. That shapes the claims:

• Ice dams. Snow melts on a poorly insulated roof, refreezes at the eaves and backs water into the top-floor unit. It’s a classic New England claim, and it tests who insures the ceiling and walls.
• Frozen and burst pipes in exterior walls, unheated basements and vacant units. If an owner winters elsewhere, the documents and the policy may require heat or a shutoff.
• Old wiring and heating. Knob-and-tube wiring, old fuse panels and aging boilers draw underwriting questions. Updates help, and carriers will ask when they were done.
• Water backup. Sewer and drain backup is excluded unless added by endorsement. It’s often worth adding in older neighborhoods with combined or aging sewers.

Flood coverage for a condo association

Standard master policies exclude flood. For a building in or near a mapped flood zone, the association can buy flood coverage in its own name. The NFIP offers a Residential Condominium Building Association Policy (RCBAP), which insures the building and can cover the common areas and units under one policy. Building limits are capped: for a residential condominium building, the cap is $250,000 times the number of units, or the building’s replacement cost if lower (FloodSmart). New NFIP policies go through Selective and usually take effect after a 30-day waiting period.

Private flood is the other option. We can compare private flood carriers including Flow Flood, Neptune Flood, Beyond Floods, The Flood Insurance Agency, CatCoverage and Aon Edge. Some offer different waiting periods or limits than the NFIP. Check your building on the FEMA Flood Map Service Center or our flood zone check. On the coast, also see coastal home insurance in Massachusetts.

Setting up a master policy for the first time

If your association has never had its own policy, or is moving the policy into the trust’s name, here’s the order we suggest:

• Pull the recorded master deed and by-laws or declaration of trust from the registry of deeds.
• Confirm the trust’s legal name and who the current trustees are. The policy should name the condominium trust or association.
• Note the unit boundaries and any insurance section: required coverages, replacement cost, deductible allocation.
• Gather building details: year built, square footage, construction, roof, heating, electrical and plumbing update years, and any rentals.
• Line up the start date with any owner policies that currently insure the structure, so there’s no gap and no overlap.
• Once the master policy is in place, each owner should review their HO-6, especially dwelling coverage and loss assessment.

Lenders often ask for the master policy declarations page at every sale or refinance. Keep a current copy, and keep it with the association’s records as Section 10(c) requires.

Town guides for small associations

Local conditions change the picture. Our town guides cover condo association insurance in Salem, MA and condo association insurance in Hingham, MA. For buildings with five or more rental units, see Massachusetts apartment building insurance, and for one- to four-unit rentals, Massachusetts landlord insurance. Associations in Connecticut or New Hampshire should see Connecticut condo association insurance or small condo association insurance in New Hampshire.

Get a quote for your association

Small Massachusetts condo association FAQs

Sources

• M.G.L. c. 183A, § 10 (powers, records, fidelity insurance)
• M.G.L. c. 183A, § 13 (claims and owner liability)
• M.G.L. c. 183A, § 17 (rebuilding after casualty)
• FEMA FloodSmart (NFIP)
• FEMA Flood Map Service Center

General information for small condominium associations in Massachusetts. It is not a quote or legal advice. Your master deed and by-laws control, what a policy covers depends on its own wording and each carrier’s underwriting, and you should have an attorney review your documents.