Condo insurance in California: the master policy, your HO-6 and the 2026 changes

Condo insurance in California comes in two layers: the association's master policy on the building, and the owner's HO-6 policy on the unit. In LA both layers have grown more expensive and narrower since 2021, and in 2026 lenders and the Legislature both changed the rules. Insurance now drives dues as much as almost anything else in an older building.

This page covers how the two layers fit, what changed in 2026 for lenders, earthquake deductibles, the FAIR Plan, the new state laws, and what to read before you buy.

The master policy and the HO-6

The association insures the building and common areas under a master policy, paid through dues. What it covers inside a unit depends on the governing documents: some policies cover original interior finishes ("all-in"), others stop at bare walls. The CC&Rs and the policy decide where the line is.

The owner's HO-6 policy covers what the master policy doesn't: interior finishes and improvements, personal property, personal liability, and often loss assessment coverage, which pays an owner's share when the association assesses everyone after an uninsured or under-insured loss. When the master deductible is large, loss assessment coverage is the part that matters.

Every year the association's budget report includes a summary of its property, liability, earthquake, flood and fidelity coverage, with deductibles (Civil Code 5300). That summary is in the resale package, and it's the fastest way to see the building's insurance picture.

What lenders changed in 2026

Fannie Mae's Lender Letter LL-2026-03 and Freddie Mac's Bulletin 2026-C (March 18, 2026) mostly loosened the master policy rules:

• Replacement cost must still equal 100% of estimated replacement cost, but lenders can now rely on more kinds of proof, including endorsements, an insurer's estimate or an insurance appraisal.
• Roofs can be insured at actual cash value instead of replacement cost.
• The inflation guard requirement is gone.
• The per-unit master deductible is capped at $50,000 per unit, replacing the old 5% test, for loan applications dated on or after July 1, 2026. Where the master policy has a per-unit deductible, the buyer must carry an HO-6 at least equal to it, for that peril.
• The HO-6 deductible can't exceed the greater of 5% of coverage or $2,500.
• From January 1, 2027, servicers must confirm insurance every year and send borrowers an annual reminder.

Insurance that fails the master policy rules is one of the ten things that make a building non-warrantable. More on that on our warrantable vs non-warrantable page, and how it sits with the other changes on our condo loan rules for 2027 page.

Earthquake deductibles

Earthquake coverage isn't among the perils Fannie lists as required in the 2026 changes, so for most loans it's an owner cost question, not a warrantability question. It's still the biggest number in many LA policies.

An analysis by Coverwatch and Assembly HOA of policies held by 67 LA-area associations (excluding high-rises), reported by the LA Business Journal on October 12, 2026, found:

• The median earthquake deductible rose from 10% of building value in 2016 to 25% in 2025, and more than half of 2024 to 2026 earthquake deductibles exceeded 25%.
• Of 41 same-carrier renewals since 2021, 28 went up in price and 1 went down. Examples: $6,637 (2019) to $21,599 (2026), and $46,613 (2021) to $133,396 (2026).
• 38 renewals added exclusions, such as earthquake, water damage or mold, and none were reinstated.
• One association's property deductible went from $25,000 to $250,000 after moving from Farmers to a surplus-lines carrier.

For example, a 25% deductible on a building valued at $40 million is $10 million before the policy pays. Divided across 100 units, that's $100,000 each, which is why owners ask about loss assessment coverage and its limits.

The FAIR Plan for condo associations

The California FAIR Plan is the insurer of last resort. Its High Value Commercial Property program, which began July 26, 2025, offers condo associations up to $20 million per building and $100 million per location, where a condo "location" includes every unit on the recorded condo plan. Under CDI's Stipulation and Order 2026-2 (signed March 27, 2026), that program is set to end after July 26, 2028.

The FAIR Plan is basic named-peril coverage (fire, extended coverage, vandalism), so a building on it usually needs a separate difference-in-conditions policy for other perils. Fannie accepts a state FAIR plan as the master policy only when it's the only coverage available at closing or renewal. Whether a FAIR plus difference-in-conditions combination satisfies a particular lender is lender-specific.

Under the state's Sustainable Insurance Strategy, CDI reports that 12 insurance groups are expanding in California (page updated October 27, 2026). Our hillside condo guide covers buildings in the hills, where fire hazard zones are part of the insurance conversation.

New California insurance laws

Law	What it does	Starts
AB 2038 (Ch. 917)	After a disaster total loss, renewal offered for at least 3 renewals and 36 months. No nonrenewal for 2 years in or next to a fire perimeter when wildfire risk is the only reason.	January 1, 2027
AB 2061 (Ch. 918)	FAIR Plan posts policy counts and exposure by ZIP code each quarter.	January 1, 2027
AB 1278 (Ch. 877)	Interest on loss draft accounts (at least 2%) can be paid to the borrower.	January 1, 2027
SB 1301 (Ch. 693)	90-day nonrenewal notices with a plain reason and the imagery relied on; limits on nonrenewal for certain claims or roof age.	January 1, 2028
AB 69 and AB 1680	FAIR Plan coverage notices, clearinghouse information, and CDI oversight powers.	Per each bill

AB 2038 covers residential property insurance, which includes HO-6 unit policies. HOA master policies are usually commercial policies, so don't assume the same protection applies to the building; ask the association's broker. The rest of the 2026 session is on our California HOA laws for 2027 page.

How insurance affects each loan type

Loan type	Insurance test
Conventional (to $1,249,125)	Fannie and Freddie master policy rules: replacement cost, $50,000 per-unit deductible cap, insurer ratings, FAIR Plan only as a last resort, HO-6 to match any per-unit deductible.
Jumbo	The lender's own rules, often similar.
Non-QM and portfolio	The lender's own rules.
Cash	No lender test. Premiums and deductibles still flow through dues and assessments.

Premium increases also reach financed buyers through dues, since HOA dues count in debt-to-income. Our carrying cost calculator includes dues and HO-6 in the monthly number.

What to read before you buy

1. The insurance summary in the annual budget report: carriers, limits, deductibles for property, earthquake, flood and liability.
2. The master policy declarations page, including any per-unit deductible and whether the carrier is admitted or surplus lines.
3. Whether the building is on the FAIR Plan, and what difference-in-conditions coverage sits with it.
4. Board minutes for renewal discussions, premium increases, new exclusions or a planned assessment.
5. An HO-6 quote before you remove contingencies, with loss assessment coverage sized to the master deductibles.

The buyer checklist lists these with the rest of the package. Owners and boards can find more in our LA condo HOA guide, the HOA board brief, and our post on what rising HOA dues mean. High-rise buyers should know the LA Business Journal sample excluded high-rises; ask for the actual policy in any tower, such as Bunker Hill Tower (252 residences, 1968) or any of the buildings in our high-rise guide.

Common questions

What does an HO-6 policy cover in a California condo?

An HO-6 covers what the association's master policy does not: usually interior finishes and improvements, personal property, personal liability and loss assessment coverage. Where the master policy stops depends on the CC&Rs and the policy. If the master policy has a per-unit deductible, Fannie Mae and Freddie Mac require the buyer's HO-6 to cover at least that amount.

What is the maximum HOA master policy deductible for a condo loan?

For conventional loans sold to Fannie Mae, the per-unit master policy deductible is capped at $50,000 per unit for loan applications dated on or after July 1, 2026, replacing the older 5% test. Jumbo and non-QM lenders set their own limits. Earthquake deductibles are a separate question and are not part of Fannie's required perils in the 2026 changes.

Can a condo building use the California FAIR Plan?

Yes. The FAIR Plan's high-value program offers condo associations up to $20 million per building and $100 million per location, and is set to end after July 26, 2028. FAIR is basic named-peril coverage, so buildings usually add a difference-in-conditions policy. Fannie Mae accepts a FAIR plan only when it is the only coverage available.

Why are LA condo HOA insurance costs rising?

Carriers have raised prices and narrowed coverage for California associations. One October 2026 analysis of 67 LA-area associations found 28 of 41 same-carrier renewals since 2021 went up, median earthquake deductibles rose from 10% to 25% of building value between 2016 and 2025, and many renewals added exclusions.

This page is general information about insurance rules and published lender guidelines. It is not insurance or legal advice, and we are not insurance brokers. Coverage depends on the specific policy wording; ask a licensed California insurance broker about your HO-6 and loss assessment coverage, and the association's broker about the master policy. Facts are current as of October 27, 2026.