Homeowners and Condominium Association Insurance
WHAT IS HOA INSURANCE?
No matter how hard you try to prevent them, accidents do happen. People can slip and hurt themselves in your swimming pool area, children can suffer injuries in the playground, and damages to common elements can take place. These circumstances can result in someone — a homeowner, employee, or guest — filing a claim against the HOA.
This is where HOA insurance, often referred to as an HOA master insurance policy, comes in. What is a master policy? A master policy is a type of insurance policy homeowners associations purchase to ensure coverage in case of liability expenses or repairs to common areas.
When you buy insurance for a homeowners association or condominium association, there are a number of coverages that you should buy. Here are some things to look for.
Property Insurance for a homeowners association:
In a homeowners association, the individual homeowners own their homes, and they are responsible for insuring them. Therefore, the association might only need a limited amount of coverage, or no coverage at all. Coverage can be purchased for clubhouses, pools, playgrounds, fences, signs, and lighting.
Property Insurance for a condominium association:
In a condo association, The association is responsible for insuring common property (as defined in the association declarations), and the individual unit owners are responsible for insuring their units. Thus, in a typical "bare walls" association, the association is responsible for insuring the shell, and the unit owners is responsible for insuring everything inside the shell, such as interior walls, paint or wallpaper, floor covering, ceiling covering, appliances, plumbing fixtures, and cabinets. This means that the association generally needs to buy less coverage then the full replacement cost of the building, and the unit owner needs to make sure that their insurance program includes a lot more building coverage than most companies include automatically.
General Liability Insurance:
General liability covers for bodily injury or property damage arising out of the associations premises or operations. Every association needs this.
Directors and Officers Liability Insurance:
D&O liability protects the members of the board if they are sued as a result of decisions that they make in their capacity as board members. Common causes of claims include selective enforcement of parking rules or building covenants, and failure to follow proper procedure with respect to meetings and budget expenditures.
Fidelity bond or employee dishonesty:
Simply put, a fidelity bond is an insurance policy that protects a homeowners association from potential losses in the event of a crime, theft, or other fraudulent acts. While many refer to this type of insurance as a fidelity bond, it is really more of a crime/fidelity policy. Bonds involve three parties, while insurance does not.
Fidelity bond insurance can cover employee dishonesty as well as non-employee theft. Employee Dishonesty refers to any dishonest acts perpetrated by an employee of the association. What constitutes an employee will depend on the policy’s definition. Typically, though, in a homeowners association, this includes the management company, the community manager, and even board members (even though they are not paid).
An umbrella policy, also known as an excess liability policy, provides additional limits to supplement a primary liability policy already in place. A condo association umbrella policy covers a higher limit with the main purpose being to protect a community’s assets from unexpected events, such as tragic accidents in which the condo association would be held liable. Coverage extends past the excess of the general liability and auto liability while also adding excess Directors and Officers (D&O) liability.
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