For the individual, a good insurance policy provides much-needed peace of mind, as well as protection should something go wrong—be it an accident, a health problem, or whatever else. But of course, individuals are not the only ones who need insurance. So do many corporations and organizations—including community associations.
Some HOA’s believe that insurance isn’t needed, but the truth is that HOA insurance coverage is tremendously beneficial. The question isn’t really whether your HOA needs insurance, then, but rather it is what kind of insurance your association could benefit from.
There are four basic types of HOA insurance to consider: Coverage for commonly-owned property; for the association itself; for the leadership of the association; and, against acts of theft.
- Property insurance is perhaps the most essential kind of insurance for an HOA to invest in. A good policy will protect against vandalism, fire, and natural disaster. If your HOA has commonly-owned property, then your HOA needs to have property insurance.
- It is also important to protect the association itself against any act of “negligence.” Liability insurance is, once again, recommended for any HOA’s that have common property. That insurance will not only cover the cost of damage, if negligence is proven, but it will also cover the HOA’s legal expenses, in most cases.
Those are the two most common types of HOA insurance, and they are recommended for most community associations. There are a couple of other types of policies that warrant mentioning, however.
- Self-managed board will want to think about Directors and Officers Liability insurance. This policy will basically protect the community association’s leadership, should they make any kind of error that costs the HOA money. It does not protect against dishonesty or theft, however.
- And speaking of which… theft happens, and it’s important to be aware of that, and to protect against it. Your property insurance should cover theft from outside the HOA. To protect against theft from within—embezzlement, in other words—many larger HOA’s consider Fidelity insurance.
Consider how these different kinds of policies might benefit your HOA—and make sure you’re covered as best as you are able!