Guides
Townhouse insurance: HO-3 or HO-6?
Whether a townhouse needs an HO-3 or an HO-6 depends on who owns and insures the roof and walls, not on its style. Here is how to tell from your documents.
A townhouse you own outright, structure and all, is insured on an HO-3. Some townhouses are legally condominiums, though, and belong on an HO-6 because an association insures the building shell. "Townhouse" describes how the home looks, rows of attached houses with shared walls. It does not tell you who insures the roof. Your recorded deed, your community's governing documents and the association's master policy do.
Getting this wrong is expensive both ways. An HO-6 on a townhouse you own outright leaves the roof, the exterior walls and the foundation with no coverage at all. An HO-3 where the association insures the structure may carry a limit well above what you need, or be rejected at underwriting. Spend an hour on the documents before you ask for quotes.
The two ownership structures
Fee simple townhouse. You own the structure and either the lot it sits on or the land under it, usually in a planned community with a homeowners association that owns and maintains common areas: roads, a pool, a clubhouse. Nobody else insures your building. You carry an HO-3 (or the HO-5 variation) on the full structure, and the association's master policy, if there is one, covers only its own property.
Condominium-form townhouse. The community is legally a condominium. You own your unit, which in many declarations means the interior from the studs inward, and an association owns the structure, roof, exterior walls and land as common elements. The association insures those under a master policy, and you carry an HO-6 for the rest. The Washington Office of the Insurance Commissioner treats condo insurance as the product for the owner of "an individual unit within a larger condo or townhome community" and says the split is "based on the community's governing documents" (OIC).
Lenders recognize the same line. Fannie Mae's Selling Guide (B7-3-03, version of August 5, 2026) says individual property insurance is generally required for each financed property in a planned unit development, with the lender not required to verify master coverage on PUD common elements when owners insure their own units. For condo projects the default reverses: master policies are required for the common elements and residential structures unless the legal documents require individual policies for each unit (Fannie Mae). A planned-unit-development townhouse therefore looks like a house to the lender, and a condo-regime townhouse looks like a condo.
How to tell which you have
Check these in order.
- The deed and title policy. A fee simple deed conveys the land and building. A condominium deed describes a unit and an undivided interest in common elements.
- The recorded declaration. A "declaration of condominium" means condo. A "declaration of covenants, conditions and restrictions" for a planned community usually means fee simple with a homeowners association. Your closing file should include it.
- The insurance article of the declaration or bylaws. It says who insures what, and whether owners must buy a unit-owner policy.
- The association's certificate of insurance. The Washington OIC says unit owners receive a certificate each year at renewal confirming the master policy's limits and deductible. If you cannot find yours, ask the property manager or board president.
- Your property tax bill. A bill showing land and improvements often points to fee simple, but it is not conclusive.
When the documents are ambiguous, a few communities have hybrid arrangements where the association insures only the roofs and exteriors of fee simple townhouses. Insurers can handle those differently, so put the question to the insurer in writing, with the insurance section of the declaration attached.
What each policy has to cover
| Fee simple townhouse (HO-3) | Condo-form townhouse (HO-6) | |
|---|---|---|
| Roof, exterior walls, foundation | You insure them | Association insures them |
| Interior walls, floors, finishes | You | Depends on master policy category |
| Land | Not insured under the policy | Association owns |
| Dwelling limit based on | Full rebuild cost of your unit | Your share of interior items the master policy leaves out |
| Loss assessment | Possible, if the association levies charges | Important |
Under the ISO HO-6 form (HO 00 06 05 11), Coverage A insures the alterations, appliances, fixtures and improvements that are part of the building within your unit, items of real property that pertain exclusively to it, and property that is your insurance responsibility under the association's agreement. The "residence premises" is the unit where you live. Land is not covered under either form.
Three master-policy categories
The split inside the building runs on one of three patterns, and the names you will hear are not always the same in each community. The Washington OIC lists three:
- All-in. The master policy covers the exterior and all interior finishes. You pay the master policy deductible through your own policy.
- All-in, excluding improvements or betterments. The association covers the unit to its original interior and exterior finishes. You cover upgrades.
- Bare walls or walls out. The association covers damage up to the uncovered sheetrock and subfloor. You cover interior finishes and the community deductible.
Industry terms for these are all-in coverage, walls-in coverage and bare walls coverage; condo master policies: what the association covers and what you cover walks through them. For a condo-form townhouse, the category sets your HO-6 dwelling limit.
Setting the limit
For a fee simple townhouse, the dwelling limit should reflect the rebuild cost of your whole unit, not its market value and not a fraction of the row. Say your interior townhouse has 1,800 square feet and a contractor-based estimate puts rebuilding at $360,000. You carry $360,000 in Coverage A even though the next unit shares a wall. If a fire destroys your side of the row, you rebuild your side. The lot does not figure in the limit, since land is not covered. See How much dwelling coverage do I need? and use the home replacement cost estimator; replacement cost vs market value: why your home's price is the wrong number explains why the sale price is the wrong number.
For a condo-form townhouse, you need only what the master policy leaves to you. Say the declaration puts you on bare walls and the improvements in your unit cost $70,000 to replace. A $70,000 Coverage A limit fits. If you set the limit at $20,000 because the agent assumed the association pays more than it does, a kitchen fire becomes your problem. Ask for the master policy's category in writing.
Assessments and the master deductible
Both structures face the same risk: a loss to common property or a lawsuit against the association that exceeds its insurance. The association passes the balance to owners as an assessment. The standard ISO homeowners forms give $1,000 for property-side loss assessment, which is small relative to many master deductibles. Loss assessment coverage for HOA and condo owners covers how to raise it. For fee simple townhouses in a planned community, HOA insurance requirements for owners: what you must carry explains what associations tend to carry and what they require from you.
For loans Fannie Mae buys, the master policy deductible can be as high as 5% of the master coverage amount, or $50,000 per unit where a per-unit deductible applies (B7-3-03, cited above). A unit-owner policy deductible may be as high as the greater of 5% of the coverage amount or $2,500 (B7-3-04, Fannie Mae). Those are lender ceilings, not recommendations, and the board sets the actual deductible.
Shared walls and your neighbor
Attached homes raise two questions. First, if a fire starts next door and reaches you, your own policy pays for covered damage to your unit regardless of who was at fault, and your insurer may seek to recover from whoever was, a process called subrogation. Second, if you cause damage to a neighbor's unit, such as an overflowing tub or an unattended stove, your personal liability coverage responds. The coverage that matters here is Coverage E; the limit you carry is worth a look. how much liability coverage should a homeowner carry? helps with that.
Questions to ask before you buy a policy
- Is my community a condominium or a planned community in the recorded documents?
- Does the association's master policy insure the structure, and which category does it use?
- What is the master policy deductible, and who pays it?
- What dwelling limit does the insurer recommend, and how is it calculated?
- What is my loss assessment limit, and can I raise it?
- What will my lender require, and what proof does it want?
The which homeowners policy form fits your home? and the coverage gap checker help you sort the answers. Rules and form names differ among states and carriers, so confirm anything you rely on against your own policy.
Key takeaways
- A townhouse is an architecture label. Whether you need an HO-3 or an HO-6 depends on who owns the structure and who insures it.
- Fee simple townhouses are typically on an HO-3 with the full rebuild cost as the dwelling limit; condo-regime townhouses are on an HO-6 sized to what the master policy leaves out.
- Read the recorded declaration, the insurance article of the bylaws and the association's certificate of insurance before choosing.
- An HO-6 on a townhouse you own outright leaves the roof and exterior uninsured; ask the HOA for its master policy summary.
- Raise the loss assessment limit above $1,000 where the master deductible or reserves look thin.