Homeowners’ associations (HOAs) are the governing bodies that oversee residential communities which are typically subject to a certain set of rules that all members must abide by. HOAs can be composed of the residents of condos, apartment buildings, co-ops or other types of homes.
An HOA should carry insurance coverage to protect itself and its residents and guests from risks and liabilities related to management and/ or ownership of property, and in some states, or by other mandate, they may be required to carry a specific type of coverage. Because there are several types of policies that are beneficial to HOA’s, many opt for a “master policy” which provides those coverages under one policy. Insurance provides coverage for the communal areas for which the HOA is responsible, in situations of theft, vandalism or natural disasters. Most HOA insurance master policies include all or some of the following:
HOA Insurance Requirement
Directors’ and officers’ (D&O) insurance protects an organization’s executives from liability. In the case of HOAs, board members are covered against any liability claims that are filed against them.
Social Host Liability Coverage
Some HOAs have common areas, such as patios, clubhouses or pools, that are used for social gatherings and other events and may also make these spaces available to rent for weddings or similar gatherings. In those situations, particularly where alcohol may be permitted, the liability to the HOA increases; social host liability provides protection to the HOA.
If your HOA has a special garage where non-residents can park, the insurance policy should include garage-keepers’ coverage. This coverage shields both the association and the owners of the vehicles that use the garage, from auto damages or incidents of theft.
Workers’ Compensation and Employee Dishonesty Bonds
Similar to other organizations, an HOA has workers and it is critical to compensate them appropriately when they become sick or injured on the job. Even if your association is only composed of contractors, this type of coverage can be extremely helpful in cases of a severe illness or injury that prompts a worker to sue the HOA for making them work in hazardous conditions.
Employee dishonesty bonds shield an HOA against damage and theft of property committed by dishonest workers.The maximum amount of theft or damage your policy will cover should be discussed with your insurance provider to ensure it is an appropriate amount for your specific association. According to Surety Solutions, an HOA that needs to cover $100,000 worth of losses can estimate a dishonesty bond to be $300 to $400 per year, although some bonds begin at $100.
As with any other form of insurance, it’s important to carefully evaluate your needs and risks and choose a policy accordingly. Not all HOAs have the same characteristics (number of board members, common areas, budget size, etc.). Additionally, the specific home safety laws that an HOA must follow may vary by state.
Many states also update their condo and HOA insurance requirement laws; an experienced provider will stay informed about these changes. For example, Illinois introduced new insurance requirements for HOAs in 2014. These requirements included owner’s insurance, directors’ and officers’ insurance and fidelity bonds. The requirements also dictate that all associations must have at least $1 million in general liability coverage, although board members can set a higher minimum if they deem this necessary. As always, be sure to consult with an experienced insurance agent so that you fully understand what your state requires.
Speak With Pro Insurance For Help On HOA Insurance Requirements
Reach out to the experienced team at Pro Insurance Group to learn more about HOA insurance requirements. We are dedicated to serving as one-on-one advocates for each of our clients, regardless of their insurance needs and budget. We also strive to develop and maintain long-lasting relationships with all of our clients.
If your HOA needs to acquire or replace a master policy, our team will help you select the correct policy for your association. These policies are designed to protect such associations from property damage and liability claims. No matter what type of HOA you belong to, our agents will ensure you are adequately protected from all major risks and liabilities. An HOA master policy does not include or replace an individual homeowner policy.