It is a fact that all Homeowners Associations (HOAs) need insurance, but depending on your location and specific needs, the type of insurance may vary. Here is what you should consider when selecting insurance for your HOA.
Why Insurance is Important
Insurance is important because it protects the investment of the homeowners. Insurance also protects the actions of the HOA Board. This means that obtaining the correct type and amount of coverage is an important responsibility of the HOA Board of Directors to ensure that your HOA is covered in all cases.
Types of Insurance
- Property Insurance: Property insurance covers common areas in case of fire, flood and earthquake or theft, vandalism and other natural disasters. In a condominium situation, most property insurance covers the structure “studs out” meaning any exterior siding, roof, elevator or stairs. Some policies do cover interior structures and elements.
- Liability Insurance: Liability insurance protects you in the case of an accident or injury on the common areas shared by the HOA, like hallways, private roads or walkways. Apart from insurance HOA’s should, and usually do, take an active role in addressing safety issues on the property to make sure that all residents and visitors are staying safe.
- Fidelity Insurance: Fidelity insurance covers the organization in the case of theft committed by employees, contractors, Association members and even property management companies.
- Directors and Officers Liability Insurance: Sometimes referred to as “D&O” coverage, this type of coverage protects officers and trustees from being held liable while performing their duties for the Association. For example, say an owner stops paying HOA dues and you need to foreclose on their property. If you are considering serving on the Board of the Association, you should double-check to make sure that the HOA carries this type of coverage.
- Worker’s Compensation Insurance: Workers Compensation will cover any employees or Association Members should they have an accident while working on behalf of the organization, like changing shoveling snow.
Insurance companies may bundle many types of insurance into one policy for the Homeowners Association, this can be called a Master Policy. It is important to speak with a licensed insurance agent to make sure that your insurance coverage is adequate and up-to-date.
Please note that these types of insurance are simply for the HOA association itself. As a homeowner, there are separate insurance policies you should carry for yourself, your property and belongings.