Alabama HOA Insurance Requirements

Section 1: Overview — how HOA insurance is regulated in Alabama

Alabama doesn't run its community associations off one insurance statute. Coverage obligations split by community type, so the practical answer for any given association turns on which framework applies to it. Condominiums formed after January 1, 1991 carry a statutory insurance mandate under the Alabama Uniform Condominium Act of 1991. Planned-community homeowners associations carry no such mandate — they rely entirely on the recorded declaration.¹³ The condominium mandate lives in Ala. Code § 35-8A-313, the insurance section of the 1991 Act.¹ Condominiums formed before January 1, 1991 stay under the older Condominium Ownership Act, Ala. Code § 35-8-1 et seq., which treats insurance as a permission, not a command.² Planned communities answer to their own covenants, conditions, and restrictions, with corporate scaffolding supplied by Alabama's nonprofit corporation law in Title 10A for associations that organize as nonprofits.⁵ Reasonable availability conditions the condominium mandate, and the association must notify owners if required coverage stops being available.¹ Fidelity (crime) coverage and directors-and-officers liability coverage aren't statutory mandates in Alabama at all; declarations or secondary-market lenders typically drive them instead.¹ Nationally, Alabama belongs to two categories at once: the condominium-statute states built on the Uniform Condominium Act, and the CC&R-primary states — Arkansas and Mississippi keep it company — where planned communities carry no statutory insurance mandate. The sections ahead lay out the framework, how coverage gets allocated, and what's happened recently.

Section 2: The statutory insurance framework

2A. The 1991 Act condominium insurance mandate

Ala. Code § 35-8A-313 requires the association of a post-1991 condominium — starting no later than the first sale of a unit to someone other than the declarant — to maintain two coverages "to the extent reasonably available."¹ The section descends from Section 3-113 of the 1980 Uniform Condominium Act; its statutory history, Acts 1990, No. 90-551, § 3-113, confirms the lineage.¹ That's a different pedigree from Section 3-113 of the 1982 Uniform Common Interest Ownership Act that Alaska, Colorado, and other UCIOA states adopted. The texts read close, but Alabama never adopted UCIOA, so UCIOA-specific insurance features don't reach here.

The first required coverage is property insurance on the common elements against all risks of direct physical loss. The statute sets the amount by valuation, not by a flat dollar floor: "The total amount of insurance after application of any deductibles shall be not less than the greater of 80 percent of the actual cash value of the insured property at the time the insurance is purchased or such greater percentage of such actual cash value as may be necessary to prevent the applicability of any co-insurance provision and at each renewal date, exclusive of land, excavations, foundations, and other items normally excluded from property policies."¹ In a building where units carry horizontal boundaries — stacked units — the property insurance has to include the units too, though it doesn't need to cover improvements and betterments an owner installed.¹ The second required coverage is liability insurance, including medical payments coverage, set by the board but never below any amount the declaration specifies, covering occurrences that arise from using, owning, or maintaining the common elements.¹

The "reasonably available" qualifier defines the whole mandate. When required property or liability coverage isn't reasonably available, the association must promptly hand-deliver or mail notice of that fact to every unit owner.¹ So the mandate is a duty to carry required coverage to the extent the market actually offers it — not an absolute guarantee. The policies also have to provide that each unit owner counts as an insured for liability, that the insurer waives subrogation against unit owners and household members, that no owner's act or omission voids the policy, and that the association's policy sits primary wherever an owner carries overlapping coverage.¹

On loss, proceeds go to an insurance trustee or the association and sit in trust for owners and lienholders, and the association must disburse them first toward repair or restoration.¹ The association must promptly repair or replace damaged or destroyed portions unless "(1) The condominium is terminated ... (2) Repair or replacement would be illegal under any state or local statute or ordinance governing health or safety, or (3) Eighty percent of the unit owners, including every owner of a unit or assigned limited common element which will not be rebuilt, vote not to rebuild."¹ On the deductible, Alabama takes the opposite position from the 2008 UCIOA owner-charge model. Subsection (j) states it plainly: "Unless the declaration provides otherwise, the association shall pay any cost in excess of insurance proceeds, including any deductible or retention under any contract of insurance as a common expense."¹ That deductible-allocation language traces to Act 2018-403, § 1.¹ Alabama grants no statutory authority to bill a deductible to the owner whose loss caused it.

2B. Pre-1991 condominiums and the Condominium Ownership Act

Condominiums formed before January 1, 1991 stay under the older Condominium Ownership Act, Ala. Code § 35-8-1 et seq.² Its treatment of insurance runs meaningfully thinner. Section 35-8-9 says the association "may maintain all forms of insurance coverage which are for the benefit of the unit owners," and it requires the association to tell each owner whether coverage exists and what type and amount — it doesn't impose the mandatory replacement-cost property and liability coverages the 1991 Act demands.² The 1991 Act's applicability section lists the specific provisions that reach back to pre-1991 condominiums, and the insurance section, § 35-8A-313, isn't on that list — so the newer mandate simply doesn't apply retroactively to older condominiums.⁴ Which act governs comes down to the declaration's recording date. A manager taking over an older Alabama condominium should confirm which statute controls before leaning on any general "Alabama condo insurance" reference, because a pre-1991 project may carry no statutory floor beyond what its own declaration requires.

2C. Planned communities, the declaration, corporate law, and the federal overlay

Planned-community HOAs carry no statutory insurance mandate in Alabama, period. The Alabama Homeowners' Association Act, Ala. Code § 35-20-1 et seq., governs associations formed on or after January 1, 2016, but it's largely an organizational and filing statute, and it says outright that it doesn't apply to associations the condominium chapters already regulate.³ For planned communities, insurance runs entirely off the recorded declaration. The order of precedence shifts by community type: for condominiums it runs statute, then declaration, then bylaws, then rules; for planned communities, the declaration takes the lead, with no overriding insurance statute behind it.

Fidelity and D&O coverage carry no statutory mandate for any Alabama community type. The Homeowners' Association Act says only that an association's organizational documents "may" provide for indemnification and insurance for the association and its officers and directors, and for fidelity bonds covering those who handle association funds — permissive language, not a command.⁵ Where an association incorporates, Title 10A supplies the corporate framework for director conduct and indemnification, a different matter entirely from any insurance mandate.⁵ The real coverage drivers for planned communities are federal and secondary-market overlays. Fannie Mae, Freddie Mac, FHA condominium project approval, and the National Flood Insurance Program all impose their own insurance conditions on associations whose units are financed, and those conditions frequently exceed any state-law floor — driving fidelity, windstorm, and flood decisions even where no state statute requires a thing.⁶⁷

Section 3: Coverage allocation and compliance obligations

A. Association coverage obligations

For post-1991 condominiums, the master policy has to carry all-risk property insurance on the common elements — and on units in stacked buildings — at the § 35-8A-313 valuation floor, plus commercial general liability with medical payments, both to the extent reasonably available. That's mandatory under § 35-8A-313, though the declaration may require more.¹ For pre-1991 condominiums, the Condominium Ownership Act treats association insurance as permissive, so the declaration and bylaws set the actual floor.² For planned communities, coverage is whatever the declaration requires — no statutory floor exists at all.³

B. Coverage allocation between association and owners

For condominiums, the master policy reaches the common elements and, in stacked buildings, the units — but not improvements and betterments an owner installed. That allocation is mandatory under § 35-8A-313.¹ Owners stay responsible for interior improvements, betterments, and personal property, and the statute expressly lets an owner carry a separate policy for those exposures.¹ The error readers make most often: assuming the master policy covers the unit interior or owner improvements. It doesn't. For planned communities, the master-versus-owner split runs entirely off the CC&Rs — contractual, not statutory.³

C. Deductibles, proceeds, and repair-or-replace

For condominiums, the association pays the deductible by default, along with any cost exceeding proceeds and reserves, as a common expense — unless the declaration says otherwise. That's variable by declaration under § 35-8A-313.¹ Proceeds sit in trust and apply first to repair, and the association must repair or replace promptly, absent termination, illegality, or an 80 percent vote against rebuilding — mandatory.¹ Owners carry loss-assessment exposure for uninsured amounts, because those amounts count as common expenses spread across every unit.¹ For planned communities, deductible and rebuild rules run entirely off the CC&Rs.³

D. Fidelity, D&O, and disclosure

Fidelity and D&O coverage stay declaration-driven or lender-driven, not statutory, across every Alabama community type — § 35-8A-313 doesn't require them for condominiums, and § 35-20-5 leaves them permissive for planned communities.¹⁵ On disclosure, the condominium statute requires the insurer to issue certificates or memoranda of insurance to the association and, on written request, to any unit owner or holder of a security interest — mandatory.¹ Lenders keep making the same error: treating the Fannie Mae fidelity guideline — coverage equal to three months of assessments plus reserves — as if it were Alabama law. It's a secondary-market condition, not a statute, and Fannie Mae's own Selling Guide says so directly: "In states that have statutory fidelity/crime insurance requirements, Fannie Mae accepts those requirements in place of its own."⁶

Section 4: Recent legislative and judicial activity

Alabama sees relatively little HOA-specific legislative activity, and no bill in the past 24 months has touched the § 35-8A-313 condominium insurance section or the Condominium Ownership Act's insurance treatment. The real pressure on Alabama association insurance right now runs market-driven — centered on coastal windstorm availability and cost — rather than statutory.

A. Recent bills

No bill enacted or pending in the 2025 or 2026 regular sessions amends the condominium insurance section, § 35-8A-313, or the Condominium Ownership Act's insurance provisions. No qualifying bill sits inside the relevant 24-month window, so this subsection reports none.

B. Recent appellate rulings

No Alabama appellate opinion in the past 36 months substantively construes the § 35-8A-313 coverage, deductible, or repair-or-rebuild provisions. The one recent decision that does touch condominium insurance settles procedure, not substance.

C. Active legislative debates

The Legislature adopted House Joint Resolution 220 on April 24, 2025, extending the Alabama Coastal Commercial Insurance Joint Interim Study Commission to study the affordability and availability of coastal commercial and multifamily property insurance, including a possible expansion of the Alabama Insurance Underwriting Association wind pool.⁹ The resolution studies the market — it doesn't amend any HOA or condominium insurance statute, and no measure toward a comprehensive planned-community insurance statute is pending.

Section 5: National positioning and related coverage

Alabama occupies two of the three broad categories that describe state common-interest insurance regimes. First, it's a condominium-statute state on the Uniform Condominium Act model, imposing a statutory condominium insurance mandate keyed to Section 3-113 and conditioned on reasonable availability — Alabama runs the 1980 UCA version, not UCIOA.¹ Second, it's a CC&R-primary state, alongside Arkansas and Mississippi, where planned communities carry no statutory insurance mandate at all; coverage there comes down to the declaration and the lender.³ It doesn't fall into the third category — the comprehensive, prescriptive states such as Florida (Chapter 718, with its structural-inspection and reserve requirements) and California (Davis-Stirling). For a multi-state operator entering Alabama, condominium obligations track the UCA Section 3-113 pattern, but planned-community coverage runs entirely off the declaration, and coastal windstorm availability in Baldwin and Mobile counties — backstopped by the Alabama Insurance Underwriting Association, the Beach Pool — is a constraint specific to this state.¹⁰ Alabama has shown no movement toward adopting UCIOA or a comprehensive planned-community insurance statute; recent legislative attention has centered on coastal market studies, not mandates.⁹

HOA Weekly updates its Alabama Insurance Requirements coverage quarterly as the Legislature and the Alabama appellate courts act and as the property-insurance market shifts. Federal frameworks (Fannie Mae, Freddie Mac, FHA, NFIP, and fair-housing accommodation rules) also apply to Alabama associations regardless of the state framework, and a fuller treatment of those rules will follow once that coverage is built out.

1. Ala. Code § 35-8A-313 (Insurance), Alabama Uniform Condominium Act of 1991 (2024 Code of Alabama, Title 35, Chapter 8A, Article 3; official text via Alabama Legislature, alison.legislature.state.al.us/code-of-alabama) ↩
2. Ala. Code § 35-8-9 (Duties and responsibilities of association for administration and management of property), Condominium Ownership Act ↩
3. Ala. Code § 35-20-3 (Applicability of chapter), Alabama Homeowners' Association Act (Act 2015-292, § 3) ↩
4. Ala. Code § 35-8A-102 (Applicability), Alabama Uniform Condominium Act of 1991 ↩
5. Ala. Code § 35-20-5 (Organization of associations; filing requirements; organizational documents), permitting indemnification, insurance, and fidelity bonds ↩
6. Fannie Mae Selling Guide B7-4-02, Fidelity/Crime Insurance Requirements for Project Developments (lender requirement, not Alabama statute) ↩
7. Fannie Mae Servicing Guide B-2-03, Master Property Insurance Requirements for Project Developments (lender requirement, not Alabama statute) ↩
8. Great American Ins. Co. v. Crystal Shores Owners Ass'n, Inc., No. SC-2023-0092 (consol. SC-2023-0289), 2023 WL 8858165 (Ala. Dec. 22, 2023) ↩
9. Alabama Legislature, HJR220 (2025 Regular Session), Alabama Coastal Commercial Insurance Joint Interim Study Commission ↩
10. Alabama Department of Insurance, Alabama Insurance Underwriting Association ("Beach Pool") wind-and-hail coverage for Baldwin and Mobile counties ↩