TIC Insurance in California: What’s Covered and What’s Not

Why TIC Insurance Deserves Special Attention

Tenancy in Common (TIC) properties offer affordability and flexibility in California’s high-cost housing market, especially when structured as SACO TICs with clearly defined usage rights. But unlike condos or single-family homes, TIC ownership introduces a layer of complexity when it comes to insurance.

Because multiple parties share ownership of a single undivided property, insurance must protect both individual interests and shared assets. And unlike HOAs in condo developments, TIC groups are usually self-governed—making coverage decisions and risk management even more critical.

This guide breaks down everything buyers and agents need to know about TIC insurance: what’s covered, what’s not, and how to make sure your property (and peace of mind) are fully protected.

What Makes TIC Insurance Different?

In a condominium, the HOA typically provides a master insurance policy that covers the building’s structure and common areas, while unit owners purchase separate HO-6 policies for their interiors and belongings.

In a TIC, there’s no HOA—only a private TIC agreement. As a result, insurance responsibilities are decentralized:

• TIC group purchases a master policy for the entire structure

• Each owner buys individual coverage for their unit’s interior and personal property

This hybrid approach makes it essential for all owners to coordinate and avoid coverage gaps.

Types of Insurance Typically Used in a TIC

1. Master Policy (aka Building Insurance or Fire Insurance)

Covers the structure as a whole, including:

• Exterior walls, roof, and foundation

• Shared systems (e.g., plumbing, electrical, HVAC if shared)

• Liability for common areas (e.g., shared driveway, porch)

• Damage caused by covered perils (fire, wind, vandalism, etc.)

Paid for by: All co-owners, based on the ownership share or as outlined in the TIC agreement.

2. Individual Unit Policy (HO-6 Equivalent)

Each TIC owner should have their own policy for:

• Personal belongings (furniture, electronics, clothing)

• Interior upgrades and improvements (flooring, cabinets, lighting)

• Loss of use if the unit becomes uninhabitable

• Liability coverage inside the assigned unit

Paid for by: The individual TIC owner.

This mirrors condo ownership in practice—but without an HOA to enforce requirements, individual responsibility is crucial.

3. Umbrella or Excess Liability Policy (Optional but recommended)

Protects against large claims that exceed liability limits on individual or master policies, especially useful if:

• The property has multiple units with shared outdoor areas

• The location presents risk (e.g., hillside, pool, stairs)

Advised for: Higher-income buyers, TICs with 3+ units, or properties with regular visitor traffic.

What’s Typically Covered in TIC Insurance?

What’s NOT Covered (Or Requires Extra Attention)

1. Earthquake Damage
   Most standard policies exclude earthquake coverage, even in California. For hillside homes or older structures, this is a significant risk.
   
   

Solution: Purchase an additional earthquake policy or ensure the master policy includes it.

2. Flooding and Landslides
   TICs located in hillside zones (like the Hollywood Hills) or near canyons may be exposed to runoff and erosion.

Solution: Purchase flood insurance and/or consider slope stability assessments.

3. Negligent Co-Owner Behavior
   If another co-owner causes damage—like a fire from an unattended stove—standard policies may not always cover your loss or displacement.

Solution: Ensure individual HO-6 policies include loss assessment coverage and confirm that the TIC agreement outlines financial responsibility in shared incidents.

4. Disputes Over Shared Repairs
   When shared components (e.g., roof, foundation) are damaged but there’s no reserve or group consensus to fix them quickly, it can delay your claim or repairs.

Solution: A clear TIC agreement, proactive budgeting, and reserve planning prevent these issues.

How to Coordinate Insurance Among Co-Owners

To protect everyone, TIC groups should:

• Agree on a shared broker or agency familiar with TICs

• Ensure the master policy meets lender requirements for fractional loans

• Require each co-owner to provide proof of HO-6 coverage annually

• Document all policies and coverage levels in the TIC agreement or addendum

Tip: Have one owner act as the “insurance coordinator” to manage renewals, gather documents, and serve as liaison with the insurance provider.

What Lenders Require for TIC Insurance

Fractional lenders typically expect:

• Master policy coverage of at least 80% of full rebuild cost

• Named insureds to include all co-owners and lienholders

• Standard perils (fire, smoke, water damage, liability)

• HO-6 policies with minimum personal liability (often $300k–500k)

Buyers should coordinate early in escrow to avoid delays or surprises during underwriting.

Advice for Buyers and Agents

Buyers should:

• Review all insurance policies during due diligence

• Confirm policy limits are adequate

• Budget for both master and individual premiums

• Request insurance certificates from the TIC seller or coordinator
  
  

Agents should:

• Recommend an insurance broker who specializes in TICs

• Help buyers understand what their lender requires

• Flag properties in high-risk zones (fire, earthquake, flood

OLIVER THORNTON
CO-CEO AND R.E AGENT | HOLLYWOOD ESTATES
PARTNER | THORNTON DEVELOPMENT GROUP

310.704.1794
[email protected]
DRE# 01969227