Texas HOA Insurance Requirements: Statute vs Declaration vs Lender

A Texas association’s insurance obligations come from up to three independent sources: the statute, if a condominium regime is involved; the recorded declaration; and the requirements of any lender financing units or homes in the community. Satisfying one does not satisfy the others, and the strictest applicable requirement is the one that governs in practice.

The most common failure is an association that complies with Texas law and still cannot get its units financed, because the statutory floor and the secondary-market floor are set at different heights and on different valuation bases.

Key takeaways

The statute is the lowest floor Where it applies at all, Section 82.111 sets 80 percent of replacement cost or actual cash value. That is a minimum, not a standard.
The declaration can require more Section 82.111 itself contemplates this, and the commercial general liability amount may not be less than any amount the declaration specifies.
The lender often requires most Fannie Mae requires 100 percent of replacement cost value and does not accept actual cash value settlement.
Deductibles are capped on the lender side Fannie Mae caps the deductible for all required property perils at 5 percent of the master property coverage amount.
Subdivision associations have no statutory floor Chapter 209 contains no insurance requirement, so for those associations the declaration and lender requirements are the whole answer.
Compliance is not one test An association can pass the statute and fail the lender in the same policy year.

What is the difference between the monthly and look-back measurement methods?

Both answer the same question — which employees are full-time and therefore must be offered coverage — but they answer it on different timelines. The monthly measurement method looks at the month you are in. The look-back method looks at a period that has already closed and applies the result forward.

How does the monthly measurement method work?

The employer determines full-time status month by month, asking whether the employee had at least 130 hours of service in that calendar month. There is no advance election, no measurement period and no lock-in. The cost is volatility: an employee can move in and out of full-time status repeatedly, and each change carries an offer obligation with it.

How does the look-back measurement method work?

The employer determines an employee’s status for a future stability period based on hours of service during a preceding measurement period, with an optional administrative period between the two for enrollment processing. An employee who averaged full-time hours during the measurement period is treated as full-time for the whole stability period, regardless of hours actually worked then — and an employee who did not is treated as not full-time for that period.

The three requirement sources compared
	Texas statute, Sec. 82.111	Recorded declaration	Fannie Mae B7-3-03
Applies to	Condominium associations only	Every association, according to its own terms	Projects with units financed through the secondary market
Property amount	At least 80 percent of replacement cost or ACV	Whatever the declaration specifies	At least 100 percent of the replacement cost value of the project improvements
Actual cash value acceptable	Yes, the statute permits either basis	Depends entirely on the declaration	No — policies settling claims on an ACV basis are not acceptable
Maximum deductible	Commercially reasonable, as the board determines	Depends on the declaration	5 percent of the master property coverage amount for all required perils
Liability requirement	CGL including medical payments, not less than the declaration specifies	Whatever the declaration specifies	Addressed in separate Selling Guide sections
Consequence of failing	Statutory non-compliance	Breach of the governing documents	Units in the project may not be financeable

Scroll the table horizontally on narrow screens.

Authoritative references

Statutes and regulations

Texas Property Code Chapter 82, Uniform Condominium Act, Sec. 82.111, Insurance — Texas Legislature · effective Current through the 89th 2nd Called Legislative Session, 2025Supports: The 80 percent property insurance requirement, the commercial general liability requirement, the horizontal boundaries rule and the improvements and betterments exclusionVerified 27 July 2026
Texas Property Code Chapter 209, Texas Residential Property Owners Protection Act, Chapter 209 in its entirety — Texas Legislature · effective Current through the 89th 2nd Called Legislative Session, 2025Supports: That the chapter governing residential subdivision associations contains no insurance requirementVerified 27 July 2026

Explanatory guidance

Selling Guide B7-3-03, Master Property Insurance Requirements for Project Developments, B7-3-03 — Fannie Mae · effective 07 February 2024Supports: The 100 percent replacement cost requirement, the unacceptability of actual cash value settlement, and the 5 percent maximum deductibleVerified 27 July 2026

Reviewed 27 July 2026 by Deon R. Williams, M.Jurs, REBC, CLCS, AIC, AINS. Next review July 2027, or sooner if the Texas Legislature amends Chapter 82 or 209 or Fannie Mae revises B7-3-03. 4J Insurance is an insurance brokerage. Nothing here interprets a specific declaration, bylaws, covenants or management agreement, and nothing here is legal advice. Your policy wording, endorsements and governing documents control. Legal interpretation belongs to the association’s counsel.

Valuation basis is the sharpest conflict

Texas permits a condominium association to satisfy Section 82.111 with property insurance at 80 percent of either replacement cost or actual cash value. Fannie Mae states plainly that policies that provide for claims to be settled on an actual cash value basis are not acceptable, and requires coverage at least equal to 100 percent of the replacement cost value of the project improvements, including common elements and residential structures.

An association carrying 80 percent ACV is therefore capable of being simultaneously compliant with Texas law and unacceptable to the secondary market. Whether that matters to a specific project depends on how units in it are financed — but the board will usually discover the answer from a lender, not from its own review.

The deductible cap is the quiet one

Section 82.111(c) permits commercially reasonable deductibles as the board determines appropriate or necessary. There is no statutory ceiling. Fannie Mae sets one: the maximum allowable deductible for all required property insurance perils is 5 percent of the master property insurance coverage amount, and where multiple deductibles apply — a separate windstorm deductible, for example — the total applicable to a single occurrence must be no greater than 5 percent of the coverage amount.

Boards under premium pressure often accept a higher deductible because the statute allows it. That decision can be made in good faith and still create a financeability problem the board did not know it was creating.

Which organization purchases this insurance?

Requirements attach to entities, and the entities are separate. The association carries the master property and liability program these requirements govern. The management company carries its own errors and omissions, general liability, workers’ compensation, cyber, employment practices and crime coverage for its own operations — none of which satisfy any requirement discussed on this page. Board members are protected through the association’s directors and officers program. Unit owners and homeowners carry their own policies.

A management agreement can require one entity to name the other as an additional insured, or to indemnify, or to waive subrogation. Those provisions reallocate risk between the parties. They do not satisfy the association’s obligations under the statute, the declaration or a lender requirement. A certificate of insurance does not create coverage, a management agreement does not replace insurance, and contract wording does not override policy wording.

Related resources

Continue learning

Use a tool

Property management glossary — Master policy, common elements, loss assessment and property coinsurance, defined.

Discuss the issue

Request a Coverage Audit — Send the declaration, the master policy and any lender correspondence. We compare all three requirement sets and report the strictest applicable on each dimension.

Which requirement wins if they conflict?

In practice the strictest applicable requirement governs, because each source enforces itself differently. Failing the statute is non-compliance, failing the declaration is a breach of the governing documents, and failing the lender means units in the project may not be financeable. Meeting only the lowest of the three does not resolve the other two.

Can we satisfy Texas law and still have a problem?

Yes, and it is common. Texas permits 80 percent of replacement cost or actual cash value. Fannie Mae requires at least 100 percent of replacement cost value and does not accept actual cash value settlement. An association can be compliant with the statute and unacceptable to the secondary market at the same time.

Is there a statutory cap on our deductible?

Not under Section 82.111, which permits commercially reasonable deductibles as the board determines. Fannie Mae caps the deductible for all required property perils at 5 percent of the master property coverage amount, including the combined total where multiple deductibles apply to a single occurrence.

We are a subdivision association. Do lender requirements still reach us?

They can, depending on how homes in the community are financed and how the association is structured. Chapter 209 imposes no statutory insurance requirement, so for a subdivision association the declaration and any applicable lender requirements are the entire picture.

Does our management company’s insurance count toward any of this?

No. The management company’s policies insure its own operations. They do not satisfy the association’s obligations under the statute, the declaration or a lender requirement, and they do not insure the association unless a specific endorsement says so.

Three documents set your association’s insurance requirements, and they do not agree with each other