Homeowners associations offer amazing benefits to the residents who live within their communities. The popularity of HOA-living has steadily increased over the past few decades, beginning in the 1970s with approximately 2.1 million residents and growing to the current total of over 69 million residents, according to the Community Association Institute’s 2016 Statistical Review.
The HOA is responsible for maintaining the appearance of the community, properly managing the finances and keeping residents safe. The HOA also bears the burden of any and all of the risks. Regulations for HOAs can vary based on the city or state, as well as from association to association, so a general liability insurance plan may not always meet the needs of a specific community. The risks are abundant for HOAs themselves; essentially every official action or function an association executes can be a source of liability. HOA managers should share any and all risks with their insurance agent to be sure they are covered under any circumstances. Here are seven essential insurance policies for HOAs:
- HOA Property Insurance: This policy can help pay for damages to association buildings and common property caused by unforeseen disasters such as losses related to hail, fire, windstorms and other common perils.
- General Liability: This policy protects the HOA from general liability claims that aren’t otherwise covered in their general insurance policy, and can also be written to include liability coverage to any location outside of community property where an HOA function or meeting is being held.
- Director & Officer Liability (D&O): This type of coverage specifically covers the directors and officers from personal liability in the event of any claims against the homeowners association for alleged wrongful acts, such as misappropriation of funds, paperwork errors, and more. Note that this does not cover willful wrongdoings.
- Employment Practices Liability Insurance (EPLI): Sometimes included in a D&O policy, this type of policy provides coverage against claims made by board members or volunteers alleging discrimination (sex, race, age or disability), wrongful termination, harassment or other employment-related issues.
- Fidelity Coverage (Employee Dishonesty): If an HOA employee were to commit any willful wrongdoing, such as theft, fraud or embezzlement, fidelity coverage would help the HOA pay for the resulting loss.
- Discrimination Coverage: When a resident enters the foreclosure process, they will often use whatever means necessary to stay in the home for as long as possible, including making claims against the HOA. This type of policy helps protect HOAs from evicted parties claiming they are being discriminated against because of class, age, gender, race, etc.
- Workers’ Compensation Coverage: Even though most HOA employees are volunteers, the association would still be held liable for any injury resulting from association-related duties. Workers’ compensation is an essential coverage for HOAs to cover any injury claims that may arise.
About Scott Litman Insurance Agency
At Scott Litman Insurance Agency, we are dedicated to protecting HOA’s like yours. We have a unique understanding of the industry and the common risk exposures that you face in your daily operations. In fact, we find that 90% of the policies we review are missing coverages that violate the Covenants, Conditions and Restrictions (CC&R), exposing the board, HOA and management to lawsuits– which is why our comprehensive policies are tailored to meet your specific needs at competitive prices. For more information about our products, contact our experts today at (818) 879-5980 ext. 201, or fill out our online form.