There are several different types of HOA insurance that every board member should be aware of. Hopefully each unit has insurance for their own possessions, and everything inside their townhouse or apartment, even if the resident chooses not to, that isn’t the homeowners association’s responsibility.

The HOA does have to have insurance for all common property, it also needs to have liability. Liability is essential to cover everyone in case the HOA or a board member is sued. It’s important that board members know and have insurance. We’re going to examine these two types of insurance, and the subcategories of them.

Property Insurance

Property insurance

This insurance covers all HOA or condo structures, but not necessarily any of the possessions inside. This policy should protect against vandalism, some weather events (storms, hurricanes, etc), fire damage, theft or any other calamities that might occur.

Flood Damage

While water damage is often covered, flood damage normally isn’t. So do be careful to read the small print to check. Even if your HOA isn’t in a high-risk area, it’s a good idea to have flood cover. Of interest to residents is how much of their unit your master insurance policy covers, as some insurance only covers the structure of their unit whereas others can include any improvements made by the homeowner. While it’s tempting to get simpler insurance with a lower premium, you never know how much you may need, and with insurance, a ‘better safe than sorry’ approach is best.

Governing Documents

If your community’s board changes the HOA insurance, then make sure to check that the policy doesn’t contradict the governing documents. Many HOAs’ governing documents do state what should be covered by insurance.

Make sure to speak to your insurance broker if anything is added to your HOA, for example, if you build a clubhouse, it probably isn’t automatically included in your insurance policy.

Liability Insurance

Regular liability insurance 

Every community should be protected against any injuries to visitors who are visiting the property covered by the property insurance. The property insurance doesn’t cover this so it’s important for your HOA to be covered by this liability insurance.

Directors and Officers coverage

 This is specifically for voluntary board members in case there are any claims against them while they’re on the board. This can happen when a homeowner starts a lawsuit and specifically names one of the board members. Directors & Officers (or D&O) coverage protects their activities as a member of the board, and only during that period, and doesn’t cover willful negligence, a breach of the governing documents or fraud. It doesn’t cover any existing lawsuits, and won’t be valid after they’re no longer on the board.

Social host liability coverage 

If your association ever rents out the clubhouse or any other event spaces, and alcohol is served you must have this insurance. If serving alcohol isn’t allowed, then it may not be necessary, but it’s good to be aware of this type of insurance. Partially linked to this is garagekeeper’s coverage, so if your community has a garage where non-members may park it’s a good idea to have this insurance in case someone’s vehicle is stolen or damaged.

Discrimination claims coverage 

This is only relevant to communities who can foreclose on residents who don’t pay their mortgage. Residents who are facing foreclosure may file a discrimination claim against the association. This insurance protects your community against any claims that may be filed.

Workers’ Compensation and Employee Dishonesty Bonds

If your HOA has employees or has paid contractors or freelancers, as they may be able to claim they’re an employee. With this insurance, the association is covered in case a worker is injured working in your association, and employee dishonesty bonds protect you in case any employee steals from the community or damages the property.

Conclusion to HOA Insurance

This isn’t an exhaustive list of types of HOA insurance, however, it covers the essential types of insurance that board members should check their documents or with their property manager to make sure this association has them if they’re appropriate. D&O insurance is absolutely necessary for all board members in case a case is filed against them. Social host liability, garagekeeper’s coverage, and discrimination claims all depend on your association. Workers’ compensation, regular liability, and property insurance are essential for all HOAs.