North Carolina Condo Insurance Rules Under G.S. 47C-3-113

North Carolina condo insurance law requires an association to carry property insurance on the common elements and liability insurance. The property coverage must equal at least 80% of replacement cost after deductibles. At The HOA Guide, we write plain-language guides to state condominium statutes so boards and owners can see where the association’s policy ends and the owner’s begins.

All of these rules sit in one section of the North Carolina Condominium Act: Section 47C-3-113 of the North Carolina General Statutes (G.S.). That section also decides what the master policy must say, who receives the money after a loss, and when the association has to rebuild.

What G.S. 47C-3-113 Requires the Association to Insure

Under G.S. 47C-3-113(a), a North Carolina condo association must maintain two kinds of insurance, to the extent available. The duty begins no later than the first conveyance of a unit to a person other than a declarant. Coverage has to be in force from the first sale to an outside buyer.

The two required coverages are:

• Property insurance on the common elements. It must cover all risks of direct physical loss commonly insured against, including fire and extended coverage perils.
• Liability insurance in reasonable amounts. It must cover all occurrences commonly insured against for death, bodily injury and property damage arising out of or in connection with the use, ownership or maintenance of the common elements.

The statute sets no dollar minimum for liability. It says “reasonable amounts.”

The property policy does carry a floor. After deductibles are applied, the total must be at least 80% of the replacement cost of the insured property. Land, excavations, foundations and other items normally excluded from property policies do not count toward that figure.

The 80% test applies when the insurance is purchased and again at each renewal date.

When the Master Policy Must Include the Units

Under G.S. 47C-3-113(b), the property policy must include the units themselves in a building whose units have horizontal boundaries described in the declaration. This applies to the extent such coverage is reasonably available. The policy does not have to include improvements and betterments that unit owners installed.

The declaration’s description of unit boundaries decides which rule applies to your building. For a general picture of what a master policy holds, see what does HOA insurance cover.

Policy Terms the Statute Requires in Every Master Policy

G.S. 47C-3-113(d) requires four terms in the association’s policies. They are:

1. Each unit owner is an insured person for liability arising from the owner’s interest in the common elements or membership in the association.
2. The insurer waives its right of subrogation against any unit owner or members of the owner’s household.
3. No act or omission of an owner precludes recovery under the policy, unless that owner was acting within the scope of authority for the association.
4. If an owner has other insurance covering the same risk, the association’s policy is primary. The master policy pays first.

G.S. 47C-3-113(g) adds two notice rules. The insurer must issue certificates or memoranda of insurance to the association. On written request, it must also issue them to any unit owner, mortgagee or deed-of-trust beneficiary.

The insurer may not cancel or refuse to renew until 30 days after notice has been mailed. That notice goes to the association, each unit owner, and each mortgagee or beneficiary who was issued a certificate.

Who Gets the Money After a Loss

After a covered property loss, the insurer adjusts the claim with the association, and the money goes toward repair first. Under G.S. 47C-3-113(e), the proceeds are paid to the insurance trustee designated for that purpose. If there is no trustee, they go to the association.

The proceeds are not paid to any mortgagee or deed-of-trust beneficiary. The association or trustee holds them in trust for owners and lienholders. Owners and lienholders receive nothing unless a surplus remains after complete repair, or the condominium is terminated.

Rebuilding Is the Default

G.S. 47C-3-113(h) requires the association to repair or replace damaged or destroyed insured property promptly. Only three situations excuse that duty.

Situation	Must the association rebuild?	What decides it
Ordinary covered loss	Yes, promptly	G.S. 47C-3-113(h) default rule
The condominium is terminated	No	Termination of the condominium
Repair would be illegal under a state or local health or safety statute or ordinance	No	The health or safety law
Owners vote not to rebuild	No	An 80% vote, including 100% approval of owners of units not to be rebuilt, or assigned to limited common elements not to be rebuilt
Verdict	Plan on rebuilding	Three exceptions in G.S. 47C-3-113(h)

Every owner whose unit, or assigned limited common element, would not be rebuilt must approve. A single objecting owner in that group blocks the vote.

Repair cost above the insurance proceeds and reserves is a common expense. Our guide to loss assessment coverage explains how an owner’s share of a shortfall works.

What North Carolina Condo Owners Insure Themselves

North Carolina condo owners may buy their own insurance for their own benefit. G.S. 47C-3-113(f) says the association’s policy does not prevent a unit owner from doing so.

In buildings where the master policy must include the units, it still does not have to cover improvements and betterments installed by unit owners. An upgrade an owner paid for may fall outside the association’s policy.

An owner’s own coverage sits in an HO-6 (condo unit owner) policy. Our guide to HO-6 insurance explains what that policy covers. Remember the primary-coverage rule from G.S. 47C-3-113(d): where an owner’s policy and the association’s policy cover the same risk, the association’s policy pays first.

When the Required Coverage Is Not Available

If the required insurance is not reasonably available, the association must promptly notify all unit owners. Under G.S. 47C-3-113(c), that notice goes by hand delivery or prepaid U.S. mail.

The statute also allows coverage beyond the minimum. The declaration may require other insurance. The association may carry any other insurance it considers appropriate to protect the association or the owners.

Who Regulates Insurance in North Carolina

The North Carolina Department of Insurance (NCDOI) helps consumers with insurance questions, complaints and issues with their insurance company. Owners and boards can file a complaint or get assistance through the NCDOI website.

For the broader legal picture, see our overview of North Carolina HOA laws. Boards that want outside help can review HOA management companies in North Carolina. To compare how neighboring states write these rules, read our pages on South Carolina condo insurance and Georgia condo insurance. National carriers are covered in our roundup of the best HOA insurance companies.

Who This Guidance Does Not Fit

This guidance does not fit a condominium whose units are all restricted to nonresidential use. Under G.S. 47C-3-113(i), the section’s provisions may be varied or waived for that kind of condominium.

It also does not fit planned communities. G.S. 47C-3-113 applies to condominiums under the North Carolina Condominium Act, and planned communities are governed by a different act. If you live in a planned community, start with our HOA insurance and reserves hub instead.

What Would Change This Guidance

An amendment to G.S. 47C-3-113 would change these rules. A new version of the statute could move the 80% floor, the 30-day notice period, or the rebuild exceptions.

Your own declaration can also change the picture. Under G.S. 47C-3-113(c), the declaration may require insurance beyond the statute’s minimum.

Before your next renewal, request a certificate of insurance in writing and compare it with your declaration and the text of G.S. 47C-3-113.

This is educational information, not insurance or legal advice. A board should confirm its coverage against G.S. 47C-3-113 and its own declaration and bylaws with a licensed North Carolina insurance broker experienced in condo/HOA master policies, and consult a North Carolina community-association attorney for its specific situation.