All homeowners associations need an insurance policy, and some states even require it by law. There are many risks involved with operating an HOA, and the association must ensure that the board, the members and the HOA property are protected.
With HOA insurance, the HOA will not be independently financially responsible for incidents such as an accident, natural disaster or negligence. Although residents will have their own insurance which is also essential, a homeowner’s insurance policy will not cover the HOA needs.
Below we will discuss the five most essential insurance policies for your homeowner’s association to protect the board, community and HOA grounds. Basic HOA policies may not be enough for your particular association; be sure to speak with your insurance company to review the coverages your HOA may need.
Directors & Officers Insurance
Many people do not realize that individuals can also be named in a lawsuit against an HOA. D&O insurance provides protection for all members, directors, managers and officers of the HOA. This prevents individuals from being held responsible for their own legal fees and defenses.
Directors & Officers insurance will generally cover legal fees, settlements and any financial loss the HOA incurs if found liable for any allegations. Frequent allegations seen in these types of claims are negligence, reporting error and financial irresponsibility. Criminal activity and fraud are usually not covered through this policy.
General Property Insurance
An HOA property insurance policy will cover anything owned by the HOA, such as common areas, playgrounds, gyms, sidewalks, etc. Furthermore, property insurance can be beneficial for incidents such as fallen light posts, structural damage or water damage due to leaking roofs.
If an HOA does not have a property insurance policy, they risk paying out of pocket for repairs and any damage done. They would also be liable for any injury caused by the damage. The HOA policy should therefore have a coverage amount equal to or greater than the value of the property.
Certain property insurance can also cover issues such as demolition and reconstruction costs. This is extremely useful in the event of code enforcement, where the policy will cover the cost if a building must be torn down or partially reconstructed due in order to meet code compliance.
One of the most common HOA insurance claims is that of liability. There are many steps an HOA can take to prevent these claims, but having property coverage will provide protection if they do occur.
Liability Insurance will cover anyone who enters the premises of the HOA property, including visitors, residents, vendors and employees. The HOA could save many thousands of dollars in medical bills and legal fees by having the proper liability coverage should someone become injured and sue the HOA.
Discrimination Claims Coverage
When a homeowner fails to make payments to the association, the HOA has the option to foreclose on their property. In many cases, the homeowner will look to file a discrimination claim to prevent losing their home.
Discrimination claims coverage protects associations should they choose to foreclose a home in which those involved are of a minority status. This also applies to those who are considered protected individuals, such as the elderly or physically impaired.
Foreclosure is increasing at a consistent rate, so it is crucial to have discrimination claims coverage.
Many businesses fall victim to their employees and this can also apply to an HOA. Companies worldwide lose over a billion dollars a year due to employee theft. Employee Dishonesty coverage protects the association against theft, fraud and other bad faith behaviors related to staff.
Coverage extends to HOA members and third-party employees such as contractors, groundskeepers, vendors, etc. This coverage will also protect against property damage caused by employees.
Employee dishonesty insurance will cover any financial losses caused by the employee including other types of losses such as property and computer fraud.
Finding The Right Coverage
Having the proper HOA insurance policy can prevent serious financial loss but determining exactly how much coverage you need can be complicated. To understand the variety of HOA policies available and establish the coverage is best for your association, talk to a professional at Pro Insurance Group today.
You can go online to request a quote or call 833.619.0770 to speak with an expert about your specific HOA needs.