In some ways, choosing the right insurance coverage for a homeowners’ association (HOA Insurance) is no different than selecting insurance for any business.
But there are significant differences you should know about — whether you’re a board member choosing insurance for the HOA or simply an HOA member choosing insurance for yourself.
Like any business, an HOA needs strong liability coverage for the common areas — buildings, equipment and land — owned or maintained by the association. The HOA’s liability coverage should protect against damage to HOA property plus lawsuits or other claims stemming from personal-injury accidents or damage to the property of others.
But what if you’re a member of an HOA considering insurance for yourself? Loss Assessment is important coverage for every HOA member to consider.
The areas owned in common by HOA members and controlled by the HOA often include expensive items — the exterior of buildings (including roofs), perhaps a clubhouse and/or pool, a centrally located HVAC system, for example.
High Deductibles are the Norm
HOAs often have extremely high deductibles — two percent is common in Colorado. With buildings and other common property owned by the homeowners’ association, that can mean a deductible of $1 million or more if a major structure is badly damaged or destroyed.
Some HOAs don’t have the funds to cover these deductibles. In the event of a loss exceeding the HOA’s insurance coverage and ability to pay, each homeowner or condo owner within the HOA may be billed an amount — a loss assessment — designed, collectively, to pay for the repairs. Loss assessment coverage can help protect you under such circumstances.
Loss assessment coverage is important to consider, as a condo owner of the HOA. But it may not cover every type of loss. And policies differ. If you’re part of an HOA, it’s a good idea to discuss the pros and cons with your insurance agent. I’ll be glad to answer any questions you have and help you decide on the right coverage for you.
HOA Building Coverage
Situations differ. But in a condominium complex or other common interest development, an HOA typically is responsible for care and maintenance of all common areas — the exterior of buildings that are owned in common, commonly owned buildings such as clubhouses and the like, perhaps sidewalks, parking structures, playground areas and landscaping.
Individual HOA members are typically responsible for the interior of their own units (in the case of condominiums) or their individual homes (in the case of a housing subdivision).
What you Need
If you’re a board member responsible for helping to decide on coverage for the HOA, the issues for you to consider are similar to the issues to be considered by any business.
Start with good liability coverage.
Do you have employees? You may need Employment Practices Liability to cover discrimination, sexual harassment or wrongful termination claims. And Business Crime Insurance can project against fraud, theft, forgery or robbery.
Does the HOA own any vehicles? You may want to consider Business Auto Insurance.
Directors and Officers Liability insurance protects against actions taken against decisions or actions by board members in performing official duties.
The list goes on and on. I can help you sort out the variables you should consider for your HOA.
Questions? Give me a call at 303.922.1002.
