Thinking about insurance in any area can be overwhelming for an individual, let alone an entire community. In the world of homeowners associations, the task of choosing the right community insurance can be even more stressful given the broader spectrum of coverage available for HOA management.  

An under-informed board or manager could end up costing an HOA more than they bargained for when critical considerations are overlooked. These guidelines can help you to figure out the best community insurance for your HOA.

Analyze providers

One of the single most important decisions an HOA can make is choosing an insurance broker or agent.  Look for trusted providers with experience, particularly in community insurance. The board can do this on their own, or you can set up a committee to help you with this task.

Referrals from professionals like other insurance providers, accountants, and attorneys can go a long way in finding the best broker or agent to fit your community’s needs. Talking to board members at other HOAs can help you as well as they have been in the same position as you.

Determine the community insurance coverage

There are many types of insurance coverage available to HOAs. Some are required specifically by an HOA’s Bylaws. Others depend on the type of association, extent of responsibility held by HOA, and complexity of the community. 

For instance, most states require HOAs to hold Directors and Officers (D&O) insurance, which protects board members from exposure to monetary and non-monetary complaints and claims. Other types of coverage include Fidelity Bond, General Liability, Commercial Auto, and Workers Compensation.

Types of community insurance coverage:

• Directors & Officers: Liability insurance that covers an HOA’s directors.
• Fidelity Bond: Offers employers protection against employees’ dishonest actions.
• General Liability: Protects against claims from normal business activities. 
• Commercial Auto: Cover vehicles that may be used in business operations.
• Workers Compensation: Provides insurance to any workers who are injured while at work.

Purchase proper levels of coverage

To position the association with proper coverage, the board can work with the insurance provider to determine what is needed. What may seem like an outrageous amount of coverage now could pan out to be insufficient down the road. Ultimately, the amount of coverage will depend on the association’s finances and asset values. It will also depend on your budget because you need to protect yourself without breaking the budget.

Your first analysis will help you identify what coverage your HOA requires, and speaking to a professional can help you hone in on that.

Have an umbrella policy

An umbrella policy is an important supplement to general and D&O policies. But they do not provide added coverage to both liability and property insurance as you might think. 

An umbrella policy is designed to fill any liability gaps after primary liability limits have been exhausted.

Wrapping up: Community Insurance

Community insurance is necessary to ensure that you are protected and that one small issue doesn’t devastate your HOA. While insurance can be stressful as you go through the process of analyzing, identifying, and purchasing. With a trusted insurance provider and a well-informed Board and HOA manager, navigating through community insurance can be easier than most expect it to be.