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Understanding HOA Insurance

A Homeowners Association (HOA) holds the responsibility of ensuring a community’s well-being, but with that comes inherent risk. Understanding HOA insurance details are critical in fulfilling those responsibilities – especially without many guidelines and no broad insurance programs built to fit all HOAs. By understanding your HOA coverage and design, you will be able to fill any known gaps in your insurance coverage, avoiding costly payments when any unprecedented issues do arise.

HOA Insurance Benefits

Why do you need an HOA insurance policy? Well, making sure your HOA has proper insurance coverage is necessary to protect the value of not only the property but also the security of the homeowners. Yes, HOAs are required to have general property and liability insurance, however these insurance policies won’t cover the HOA from all angles. In order to see where any cracks might be in your policy a few questions you can ask are:

  • How much does my current HOA insurance cover?
  • Will the HOA’s vehicles be covered and to what extent?
  • What about the HOA employees and HOA directors?

When you start to think through these questions and everything that needs to be covered – property, money flow, employees, executives – an HOA requires insurance coverage similar to a typical business. There are many points of liability, from daily operations to workers and equipment, that need to be identified and covered quickly.

Minding the HOA Insurance Gaps

Homeowners Associations must ensure they are covered with the proper home HOA insurance that is specific to the needs of an HOA to keep everyone, and everything, protected.

  • Equipment Insurance Coverage: Designed to provide coverage for loss or damage from sudden mechanical breakdown, for example a leaking water heater that causes water damage. Equipment insurance coverage is used to expand general property insurance and can be purchased for both groups of equipment or specific units.
  • Workers’ Compensation Coverage: Many HOAs might believe this is needed as they don’t have any ‘true’ employees to cover. However, any worker (contractors or freelancers) may try to claim an HOA as an employer depending on the scope of the job or how regularly they are on the grounds.
  • Employee Dishonesty: This coverage provides protection for the community from theft, fraud and embezzlement that might be carried out by HOA employees or its officers.
  • Discrimination Claims Coverage: In cases where HOAs are in the position of foreclosing on residents who fail to keep up with their mortgages, discrimination claims coverage is a must. This insurance coverage helps protect HOAs from the evicted parties claiming they are being discriminated against due to class.
  • Comprehensive General Liability (CGL): HOAs may be protected in community-owned areas by their required liability plan, but a comprehensive policy can grant liability coverage to any location where an association function or meeting is being held.
  • D & O Coverage (Directors and Officers Liability): D&O covers an HOA in the event that there is a lawsuit for misappropriated funds or officer negligence. This HOA insurance policy addition also protects officers from liability should there be claims against the homeowners association for any reason.

These additional HOA insurance coverages are different than those provided by any standard general property or liability policy. The additions will fill any gaps and protect the HOA as a business, as well as the employees who are responsible for making decisions for the association.

Completing Your Coverage

The variety and depth of HOA coverage is huge and difficult to navigate. An agent who understands your community is crucial to getting excellent coverage. Call INSURICA and discuss any changes to your community or concerns you may have about your HOA’s coverage. Working together, we can discover the exact insurance your association needs to protect the assets of your living community.

About the Author

Harmon Hamann
Harmon Hamann
As a Commercial Insurance Producer, Harmon works with risk management focused clients in the construction, energy, staffing, transportation, and manufacturing industries, as well as homeowners and condo associations. Harmon’s background makes him uniquely qualified to understand the risks that middle market businesses face.

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