Among the primary functions of the HOA is the protection of homeowners and their property—and sometimes, that means that the community association needs to take certain precautions to take care of itself, particularly when matters of liability arise. For this reason, many associations carry multiple HOA insurance policies, something that’s generally pretty wise but can also be confusing. There are so many different insurance plans out there that it can be a little daunting for board members to keep up with where they all overlap, and which ones are truly necessary. Here is a quick rundown of the different HOA insurance policies that your HOA board should, at the very least, look into.
General Liability. This policy protects the association from any acts of “negligence” that might occur. This sounds a little ugly at first blush, so it’s important to emphasize that an act of “negligence” is not necessarily intentional. In terms of the HOA, in fact, such an act typically means that an accident or injury occurs on association-maintained property. General Liability insurance will protect the HOA in these cases, which is ultimately good for everyone in the community.
Directors and Officers. This type of policy protects members of the board as individuals, preventing them from being sued for actions they take on behalf of the association. You will want to carefully review what is and is not covered by this kind of policy, as acts of “gross negligence” are typically not included.
Property. This insurance will protect the community’s physical assets; it is not at all dissimilar to the insurance you’d get for your own home, only it covers the association-maintained, “common” areas within the community. Here again, you will want to be careful to know exactly what your plan does and does not cover, as hail, wind, and flood protection will vary depending on your plan and your geographic location.
Crime Insurance. Let’s be blunt about this one: Policies like this exist to protect the community from criminal actions taken by members of the board—for instance, if the board treasurer were to skip town and take all the money with him. None of us like to think this could ever happen in our own community, but, of course, it never hurts to be cautious.
Of course, there are certain precautions you will want to take, regardless of which plans, precisely, you feel are necessary for your community. Make sure to check your by-laws, which typically specify if any particular kind of HOA insurance policy is required. Review your existing plans to be aware of any major “exclusions,” and, if you see big gaps in coverage, consider looking into an “umbrella” policy to keep your community safe and secure.