As part of the Board of Directors of an HOA for a planned community, you’re surely aware of the need for the association to carry the right HOA insurance policy to protect the Board and all of its members.
Though HOA policies are critical risk protection for the association, agents for various insurance companies frequently find that many associations don’t understand their true risk and as a result are underinsured.
HOA Board Members Can Be Held Liable
Although the HOA of a planned community is an association which faces the risk of liability, its board members may be at certain risk of liability as well.
Whether due to breach of a member’s fiduciary agreement or a member being named in a lawsuit against the association, board members can be held financially liable for decisions made by the association.
As such, it’s critical that an HOA insurance policy have the coverage to adequately protect the association and its board members against the risks that may be encountered.
What Does A Good HOA Master Insurance Policy Cover?
The usual types of coverage included in a HOA master insurance policy are:
- Property - Covers all the common areas of the community like walkways, hallways, pools, fitness centers, community buildings, parking lots, elevators, and more.
- Building - Should include Bare Walls, Single Entity, and All-In insurance policies that cover the structures, standard building elements, improvements, and more but doesn't cover owner possessions.
- General Liability - Protects members of the HOA against claims made due to injuries, property damage, and other liabilities that may arise due to decisions made by the HOA.
- D&O Liability - Protects the directors and officers of the HOA from liability as well as employees and volunteers against claims made against them relating to their duties or decisions.
Is Your Association’s HOA Insurance Policy Adequate?
HOA insurance companies find that where many associations fall short is with the D&O coverage as many HOAs leave it off assuming all liability is covered under general liability.
A general liability policy covers the HOA but still leaves directors and officers at risk of lawsuits.
Many of the HOAs that do have D&O coverage don’t have the right amount or high enough limits to protect based on the actual risk involved that could leave board members subject to a lawsuit.
In addition, it’s essential that a well-written HOA insurance policy includes the specific coverage needed to protect against the known risks that an HOA faces including premise liability, property exposure, crime exposure, business auto and inland marine exposure, workers compensation, and more.
These risks and exposures will differ with every community and every policy written.
Work With An HOA Insurance Professional
The issue of HOA insurance, and making sure your association has a sufficient HOA master insurance policy can be complex.
Doing so requires careful evaluation of all potential risks and making sure there is adequate coverage for them, as well as D&O liability insurance for directors and officers of the HOA.
Because this is a critical insurance step that no association should take alone, working with an HOA insurance company like SIG is recommended.
Together, we can identify your HOA’s risks, then decide on adequate HOA insurance to manage those risks to the benefit of your whole community.