Why Does Your Homeowner’s Association Need Insurance?

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Accidents will always happen, even if you try hard to prevent them. If people get hurt somewhere on your common property, such as in the swimming pool or playground, they can file a claim against the Homeowner’s Association (HOA). 

A HOA insurance Policy will protect your HOA against liability expenses.

Your Homeowner’s Association needs insurance. Source

Cover Provided By HOA Insurance

The Board of the HOA needs to make sure it is covered for all contingencies. An insurance agency that specializes in HOA coverage, will be able to provide you with a plan that covers the needs of your association. 

An HOA Master Policy will typically cover liability and property damage. 

  • Liability refers to if someone gets injured on the common property and decides to file a lawsuit. The liability portion of your insurance will protect you against this. This type of insurance will cover injuries or accidents that can happen on the property.  You should make sure that there are no potential safety issues on your property, as your HOA could be held responsible for actions it didn’t take, for example, not fixing a broken ceiling. 
  • Property damage refers to damage caused to HOA common areas or buildings. If your policy covers a certain type of damage, you can claim for it. Cover can vary, and some only provide minimum coverage, and might not cover you for fire or other events. Make sure you check your insurance policy to familiarize yourself with what is covered. Upgrade your policy if you think it’s necessary to do so. 
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What Types of Insurance Does Your HOA need?

Besides insurance for liability and property damage in the Master Policy, the HOA may also need the following types of insurance:

Fidelity Cover

This type of insurance protects the HOA from theft committed by contractors, association members, employees, or management companies. This must be part of the HOA insurance package. 

Worker’s Compensation

This insurance will cover your board members or other volunteers that do work for the Association without receiving remuneration. 

D&O Coverage

This type of cover is also known as directors’ and officers’ liability insurance. This protects officers and trustees of the HOA from being held liable if they make an error while performing their duties. 

Adequate Cover

Home Owner’s Associations must ensure they have enough cover for their community’s needs. Sometimes associations feel that the liability insurance is enough to protect the HOA, and then an accident happens that is not covered by their policies. 

The HOA needs to review its policy every year, to determine if they will need additional cover. Most of the policies need to be renewed on a yearly basis. 

Who Pays For The Insurance?

The cost of the insurance is divided among the homeowners, as it forms part of the money they pay to the HOA every month. Homeowners all have an equal share of the common areas, so it makes sense to divide the cost of the insurance. 

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Final Thoughts

Your Home Owner’s Association needs to ensure it has the proper insurance for all types of scenarios and problems. Many HOA’s don’t know what insurance they exactly have, and about only 25% have adequate cover. It’s essential that you understand and maintain your HOA insurance, otherwise you may face expensive litigation that could end up costing your HOA thousands of dollars. 

Disclaimer: This content does not necessarily represent the views of IWB.

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