Understanding HOA Insurance
Much like health insurance, car insurance, or any other type of insurance, getting your HOA insured is vital. Having insurance that can cover all types of issues is a key factor in running a successful HOA. Sadly only about half of homeowners associations maintain their insurance, and of that half, only 25% maintain adequate coverage.
Understanding the different insurance plans, let alone choosing which plan works best for your HOA, can be a big task. While nearly every HOA has some sort of policy in place, many are unfamiliar with the details of their policy. We’ll explain the basics of homeowners association insurance, and help you to identify which plan makes sense for your community.
There are five main types of insurance coverage plans all HOAs should carry. These plans cover a wide range of issues and will ensure that your HOA is protected should any problems occur. It might seem over the top to cover your HOA in so many different plans. You’ll be grateful when the beloved town fountain bursts a pipe and the community garden nearby is underwater!
The five key plans to explore are Property insurance, which shields your board from catastrophes like the one mentioned above. Liability insurance promises that your board is not held liable for any workers’ injuries that may occur while working for the association. The third is Directors & Officers liability insurance. Insurance protects trustees and officers (that’s you!) from being held accountable for the actions as members of the board. Fidelity insurance protects your HOA from theft committed by association members themselves or anyone else hired out by the board. The last type of insurance you’ll need is Workers’ Compensation. This covers any individual who volunteers to work for the homeowners association.
This list might seem long, but the good news we have for you is that many HOA’s carry what is known as “Master Policies.” These policies have nearly all of the above in one package. As a member of your HOA board, it’s your responsibility to ensure that homeowners in your neighborhood are getting coverage. We warn against insufficient coverage, as homeowners have the right to look at all of your paperwork. Community members can bring it to higher laws should your board not carry the types of insurance you’ve promised.
What Happens When Your Board is Uninsured?
Disaster! We’re kidding, however, because the board assumes so many responsibilities on behalf of the community, board members–and occasionally the entire association itself– can, unfortunately, become targets of many lawsuits. Litigators have been known to even target board members.
This is when D&O insurance becomes your best friend. Of all the different forms of insurance we described above, D&O coverage provides protection to individual board members. It’s important to remember that D&O insurance only covers wrongful acts committed unintentionally by members of the board, and will not protect you from careless acts done on purpose.
Because HOAs run on the commitment of volunteers like yourselves, it’s important to your HOA’s success to make sure that you and the rest of your board are covered by at least some of these plans. D&O coverage and workers’ compensation insurance are the keys to ensuring your HOA will be safely protected. Whether it’s cleaning up parks or hosting community parties, volunteers who lend free support are protected under the law.
Everyone’s Covered, Everyone’s Cared For
We know that understanding insurance information can be an annoying headache, but if you’ve decided to volunteer as member of your local homeowners association and you’ve gotten your HOA covered, we guarantee you’ll be patting yourself on the back when a local resident tries to blame you for burning himself on the community barbecue grill despite signs that say “Don’t Touch Grill While In Use.”
It’s important to get familiar with the plans your board sets in motion and to understand your HOA’s and the community’s protection. Keep a careful record of your policies and lean on outside help to explain your board’s coverage plans if you need it. This will save you a lot of time and money in the long run. When everyone is covered, everyone is cared for, and you can spend more time planning a burn-free community barbecue for the neighborhood instead of fighting Crazy-Gary-from-down-the-street in the courtroom.