What is fidelity insurance?

Fidelity insurance, also called a fidelity bond, is the piece of an HOA’s insurance coverage that pays out if someone handling the association’s money, a board member, manager, or employee, commits theft, forgery, or embezzlement. For condo projects with more than 20 units seeking FHA approval, HUD sets its own floor: coverage has to equal the greater of three months of aggregate assessments plus reserve funds, or whatever the association’s state law requires, and the requirement extends to the management company’s own policy if one is hired. A handful of states mandate the coverage outright: California’s Civil Code Section 5806 requires it to equal combined reserves plus three months of total assessments and extends the rule to managing agents, Florida Statute 720.3033(5) requires it for anyone who controls association funds (though members can vote annually to waive it), and Washington’s RCW 64.90.470 requires it be in place no later than the first sale to an outside buyer. It’s separate from directors and officers coverage, which protects a board member who gets personally sued over a decision, not from money that goes missing.

Why does fidelity insurance matter?

Volunteer boards move real money through the association’s accounts with far less oversight than a typical business has, which is exactly why fidelity coverage matters, it’s what stands between one dishonest actor and a drained reserve fund. It’s easy to treat as an afterthought next to property and liability coverage, but skipping it leaves a community with no recourse if that trust turns out to be misplaced.

When You’ll Run Into This

This usually comes up during the HOA’s broader insurance review, alongside general liability and property coverage. Our overview of condo and HOA insurance basics covers where fidelity coverage fits into the bigger picture.