A homeowners association’s bylaws define how the community operates. Typically, these bylaws include stipulations for how...
What Type of Insurance Does an HOA Need?
Your homeowners association is an important part of keeping homeowners, their families, other board members, and guests safe and happy. If you are responsible for managing an HOA, one of your many responsibilities is to ensure that the proper insurance coverage protects everyone.
So, what types of insurance policies should an HOA have in place? Here are five different policies that might be a good idea to have for your particular HOA.
General liability insurance
Any person or organization that owns physical property runs the risk that someone will have an accident while on that property. Commonly referred to as slip-and-fall coverage, this type of insurance provides broad coverage for various types of incidents that can occur within the community, such as personal injuries and property damage.
For instance, if a delivery person or resident slips and falls on a walkway, general liability insurance will cover the cost of any damages. If someone claims that their property was stolen or damaged while on the shared spaces of the HOA and files a lawsuit, general liability insurance will also cover the damages. The most common areas that an association might face liability include shared roads and sidewalks, a pool or hot tub, and stairways leading to units.
Property damage insurance
As an HOA, it’s important to protect the association’s investment in physical assets and property. Your association likely owns one or more buildings, including outbuildings or offices. Property damage 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, however.
Because the HOA must rely on the services of a variety of individuals and companies, you most likely have one or more staff members working regular business hours. Maintenance workers will be on-site throughout the week, while vendors need to enter homes and buildings to make repairs. Additionally, Association members perform different services both on- and off-site.
Directors & Officers Coverage (D&O)
Directors & Officers insurance protects an association’s board of directors against disputes over assessments, liens, and rule violations. Because they have weighty responsibilities and oversee many matters — including things that may cause tension — board members generally need special protection.
For instance, the Board may face accusations of improper management regarding HOA dues, slander against a vendor or homeowner, or of failure to pay an HOA debt. The claim may not be true, or it could stem from an error someone made in good faith. But if someone goes to court, D&O insurance would cover the expense of defending individuals over such issues. It also protects board members’ personal assets from litigation.
Apart from that, this type of HOA insurance policy also helps encourage homeowners to volunteer for board positions; they’ll know their personal finances won’t be at stake for simply doing their HOA duties.
A master policy
Many of the common coverage needs for a condo association or homeowners association are bundled into a single master policy. This insurance would usually cover damage to shared or public areas as well as liability against accidents that occur on the association’s property. You may want to begin by purchasing a master policy and verifying what it covers, then adding riders as needed.
If your HOA is looking for an experienced HOA management company to assist with finances and accounting, including choosing an effective insurance policy, APS Management can help. Browse our services or contact us to request a proposal today.