When it comes to protecting yourself, your family, and your property, insurance is a smart decision. Whether it is legally required or not, having the right insurance policies can help protect you financially during hard times. The same is true for companies and organizations, including HOAs.
Unfortunately, HOA insurance can intimidate some people. There are many types of policies that your association may benefit from, so how can you be sure that you are getting the coverage you really need?
This article will offer a general overview of HOA insurance, including what it is, why it’s necessary, and what types of coverage your HOA may want to consider investing in.
What is HOA insurance?
The concept of HOA insurance is fairly straightforward. It is insurance that is specifically designed to meet the needs of HOAs and their boards. However, getting the right coverage for your association can get a little confusing, as HOA insurance typically doesn’t include just one simple policy.
Is HOA insurance really necessary?
The short answer: yes.
Just as every homeowner needs to have homeowner’s insurance, every HOA should have at least some insurance that will cover extraordinary costs incurred by unusual events that happen in the community. This protects your HOA from excessive financial burden. Simply put, it is a smart decision to have sufficient insurance coverage for your community.
Additionally, some states actually require HOAs to carry certain insurance policies. Make sure you know the laws in your area in order to remain compliant.
What types of coverage does my HOA need?
Insurance needs can vary from one association to another. It’s important to know what your HOA really needs to make sure you aren’t paying for coverage that doesn’t benefit you and your community.
Typically speaking, most HOAs should start with two main types of insurance: commercial property insurance and commercial general liability insurance.
Commercial property insurance covers community-owned buildings, possessions, and equipment. This could include buildings like a community clubhouse or gym (along with everything inside them, like computers, furniture, or gym equipment), playground equipment, pools, and so on. These policies usually cover some catastrophes and exclude others. For example, theft of a computer may be covered, while flood damage is not. Make sure you work closely with a qualified HOA insurance agent to make sure your policy gives your community the coverage it needs.
Commercial general liability insurance protects the HOA in the event that a third party is injured, or their property is damaged, due to association negligence. For example, if someone slips and falls on the community’s playground equipment, and it is determined to be the association’s fault, this insurance would help cover medical and court costs the HOA incurs.
These two policy types will go a long way in protecting your HOA and the people who live in and visit your community. However, many associations require even more coverage. Other common types of HOA insurance include:
- Worker’s compensation insurance — If a board member, volunteer, or HOA employee is hurt while working for the HOA, this type of insurance will help cover their cost of care.
- Vehicle insurance — This can cover HOA-owned vehicles, and can be extended to partially cover individual-owned vehicles being used for HOA business. Coverage will vary, so be sure to get the right policy for you.
- Commercial crime insurance/fidelity insurance — This will protect your HOA against losses caused by crimes committed by HOA volunteers or employees (e.g. embezzlement or fraud).
- Directors and officers insurance — HOA leaders are often faced with difficult decisions, and it’s impossible to predict how those decisions will pan out. If an HOA director or officer makes a decision that ends up hurting the association financially, this type of insurance could help cover the costs.
- Cyber insurance — As cyber crimes become more common and more catastrophic, this type of insurance will likely become more common. Cyber insurance protects you from damages brought on by data breaches or computer viruses.
- Flood/earthquake insurance — Many property insurance policies do not cover damage caused by certain natural disasters. If you live in an area prone to floods or earthquakes, you may want a separate policy that would offer this specific type of coverage.
- Event insurance — Hosting a Fall Festival or Summer Carnival? It may be smart to purchase additional insurance to cover special events.
How can I make sure my HOA has adequate insurance coverage?
The best way is to talk to an HOA insurance expert who can answer your specific questions and factor in your community’s unique needs.
HOA insurance is an important aspect of good association management, so make sure to get the coverage you need as soon as possible. That way, when the unexpected happens, your HOA will be ready and protected.
