When you buy auto insurance or homeowners insurance, you generally purchase two types of coverage: coverage for loss of or damage to property and coverage for injuries to third parties. If a tree falls on your roof, your insurance reimburses you for the repairs. If a party guest breaks his arm in a fall near your backyard pool, your insurance reimburses him for his medical costs.
If your home is part of a homeowners association -- say, the gated community that Florida youth Trayvon Martin was visiting at the time of his death -- you actually have two insurance policies. You purchase coverage for your home and its contents, and the association purchases coverage for the common areas, like the clubhouse and the green spaces. If the association documents are done right, they specify what is considered homeowners' property and what is considered common area.
The difference is important for both property and personal injury coverage. If a tree falls on the clubhouse roof, the association's insurer should pay the claim. If you have a kitchen fire, your homeowners insurance takes care of it. Likewise, if a person slips and falls on your front steps, you call your homeowners insurance company.
And, if someone is shot and killed in a common area of the homeowners association, the HOA's policy would kick in -- in theory, at least.
The insurance coverages we've described above are typical, but insurance policies differ. For the most part, the basic coverage is the same and the policyholder can purchase additional coverage for, say, jewelry or a collection of antique cars. The homeowners association where Martin died in February apparently purchased coverage that may not honor a claim filed by Martin's mother.
We'll get into the details in our next post.
Source: Orlando Sentinel, "Trayvon Martin family's HOA insurance claim lands in federal court," Jeff Weiner, Aug. 6, 2012