Finding the Right Insurance for Your HOA

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Mitigating your HOA’s risk is one of the most important aspects of HOA leadership. While many associations can go a long time never needing the insurance they’re paying for, your association will eventually need to file a claim.

Even when properly insured, insurance claims can still place financial stress on an HOA, since many associations operate under a tight budget.

We want to help you fully protect your HOA so that, when the time to file a claim comes, your HOA is fully able to handle the financial burden.

Thankfully, making sure your HOA has the protection it needs is simple. Finding the right insurance involves knowing where to go to find your insurance obligations, checking regularly to make sure your coverage adequately reflects your HOA’s current needs and making sure you’ve partnered with the right professionals who can guide you in making the insurance choices that are best for your HOA.

We suggest the following tips when managing your HOA’s insurance:

Check your state’s insurance requirements. Most states will have insurance requirements for HOAs. If you want to know what insurance amount is, or is not, acceptable for your HOA, checking your state’s statutes is the best place to start. Unsure what all the legalese means? Talk with your association’s attorney to make sure your interpretation of the law is correct.

Review your association’s governing documents. Your governing documents should also mandate minimum insurance requirements. The governing documents will also say what property the association is responsible for insuring.

Is your community a few years old? It’s possible the minimum required amount in the governing documents may no longer be an accurate reflection of your community’s needs – the emergence of powerful inclement weather over the last few years has changed the insurance landscape. To be safe, we recommend performing insurance audits on a regular basis (yearly is best). Consider amending your governing documents to require regular insurance audits, if no clause currently exists.

If no minimum amount is required in your governing documents, it seems out of date, or there have been additions to the community’s assets since the governing documents was written, then it’s likely a good idea to update the governing documents. Mandating a reasonably amount of insurance for future boards will help protect your community.

Work with an insurance broker. Whether you’re trying to find someone to audit your insurance needs or trying to find coverage that’s right for your HOA, it’s critical to find someone to partner with. Most policies are not made with HOAs in mind, which means that most associations are either underinsured or are overpaying for services they don’t need.

For example, many board members don’t realize they need directors’ and officers’ liability insurance. Designed to protect board members, D&O coverage protects the individual board members from bearing the financial brunt of a lawsuit.

Another insurance coverage option many boards neglect is workers’ compensation. Volunteers, while not technically employees, can still file a claim against the association if they’re injured while performing duties for the association.

Blue Lime, works exclusively with associations to get them the insurance that meets their needs for the best possible price. We recommend going here to find out more about how they can help you get the coverage you need.

Update your insurance as you make property additions or improvements. Any time you change the value of a property, it will likely change the insurance coverage amounts. Insurance is based off your current assets, and additions like a splash pad or a gazebo in your park are not going to be covered.

Start the quoting process 90 days before your renewal is due. The industry average is 90 days, and the sooner you act, the more time you will have to compare the different quotes with your broker and find the policy that is right for your association.

Consider financing your insurance premiums. While it is more traditional to pay all at once, insurance premiums are usually the biggest (or among the biggest) line items in an association’s budget. Spreading out the cost enables associations to have more capital on hand throughout the year.

Our friends at MintFish works exclusively with associations to finance costs. We recommend going here for more information on how they can help you finance your insurance premiums.

The above tips should help narrow down your HOA’s basic insurance requirements and will help you know if you’re on the right track when shopping for insurance.

Insurance Types

Even though partnering with a trained professional is the best way to ensure your association has the right coverage, knowing more about the types of insurance that HOAs usually need will help you when discussing options with your broker.

What types of insurance does my association need?

Association insurance is different than homeowner insurance, and, as such, many board members may not know the types of insurances HOAs need in order to be properly insured.

For a list of insurance types to discuss with your broker, please see the following:

• General Liability Property Insurance: having this type of insurance will cover the structures of your HOA (but not the contents).
• Commercial Property Insurance: this insurance covers the HOA’s personal property.
• Regular Liability Insurance: this type of insurance protects the association from injury claims from visitors.
• Flood Insurance: flood insurance covers the HOA against flood damage (not all types of floods will be covered, however).
• D&O Coverage: D&O coverage protects board members from personal liability. The average lawsuit against a board member or officer costs the individual more than $300,000, so this type of coverage, though often overlooked, is crucial.
• Workers’ Compensation: this type of insurance is crucial to have even if the HOA doesn’t have any employees, as volunteers who are injured while assisting the association may be able to file a claim against the HOA.

The above insurance types are considered the basic, bare bones coverage types that HOA boards should consider obtaining when shopping for a policy of their own.

Your broker will be able to tell you if the above insurance types will provide sufficient coverage for your HOA, or if you will need additional coverage.

We hope this breakdown of how to find the right insurance and which types of insurance to shop for has been helpful for you. If you have any more HOA-related questions, subscribe to our blog today!

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