Beyond groundskeeping and pool maintenance, your association is likely responsible for maintaining a reserve for emergencies, liability claims, and unexpected property damage. Board members and homeowners alike often wonder where their homeowner coverage ends and the association’s coverage begins. Understanding these limitations is half the battle when it comes to managing common areas and planning for your community’s future.
Because every property is different, it can be tricky to understand what an HOA insurance policy should cover. Did you know that if a guest slips and falls while walking down a row of townhomes, your HOA is probably responsible for her medical bills? Or that if a golf ball comes through a neighbor’s bedroom window during match play, your association could be liable for damages?
Let’s explore some HOA insurance basics and common situations, the better to serve your community.
What Does HOA Insurance Cover?
Homeowner associations are responsible for protecting the assets of the association itself, which typically includes common areas and everything attached to those areas. For example, while your homeowner policy (either an HO6 for condos or HO3 policy for single-family homeowners) covers your unit interior and your personal property, the association’s policy covers your home exterior and everything outside of your condo walls.
This can include:
- Roof, exterior walls, floors, lobby, etc.
- Fence lines, landscaping, playground equipment
- Pool, cabana buildings, tennis courts
- Clubhouse
- Roads, streets, drainage systems
Typically, association insurance also includes liability coverage, which can help protect members’ wallets if someone gets hurt in common areas. Say someone is lifting weights in the community fitness center and drops a bench press on their foot: Not only will the association’s insurance cover visitors’ medical bills, but liability coverage can help pay for legal fees should that guest decide to sue your HOA.
HOA Insurance Types
The board of directors must look over the CC&Rs before renewing or purchasing an insurance policy. Often these documents state how much coverage the association requires, and what assets the insurance policy should cover.
While there is no single policy that provides coverage for every situation your community may encounter, several types of HOA insurance coverage can create the perfect plan when used together. Certain coverage types fill in the gaps of general property coverage, while others are necessary to protect the HOA from loss due to professional misconduct.
Master Policy
Every association needs a master policy that covers property damage and liability. If you own townhomes or condos, make sure you know whether your master policy is “bare walls” (only the building) or all-inclusive (may include original appliances and cabinets). Keep your community members informed, so they know what their HOA insurance does not cover.
General Liability
This is likely the insurance coverage your HOA uses most often. If someone is injured on association property or the HOA damages a homeowner’s property, the association’s general liability coverage can help pay legal fees, judgments, and medical expenses. If the coverage limits are too low, one major lawsuit could put your association out of business.
Directors and Officers
Also known as “D&O” insurance, this coverage is to make sure your HOA continually recruits quality board members. It covers the personal assets of board members that represent the HOA in the event of a lawsuit — say, if someone sues the HOA for wrongly towing their vehicle, claiming discrimination.
Fidelity Bond
This type of coverage can also be called crime insurance. It protects the association’s bank accounts from theft or fraud. This is especially important for associations that want to protect their reserve fund. Imagine an HOA’s treasurer skimming money from the common area maintenance fund — a fidelity bond would cover that loss.
Equipment / Property Coverage
In addition to buildings, associations may purchase coverage for expensive property like elevator components or pool pump motors. If your community is a high-rise, for one example, your HVAC system could fall under this category as well. Without this coverage, if a boiler explodes due to aging parts your association would have to pay for a replacement out-of-pocket.
What Is Not Covered By HOA Insurance?
Now that you have a general idea of what HOA insurance covers, it is also important to understand common exclusions. HOA insurance typically doesn’t cover damage resulting from insufficient maintenance. If a roof begins to leak because the board failed to address the wear and tear of a 20-year-old roof, your insurance carrier will likely deny coverage.
Another common exclusion involves “acts of God.” While many of these events can be covered by purchasing additional insurance “riders,” certain events may require their own policy. Things that HOA insurance policies typically do not cover include:
- Flood / groundwater rising or overflow
- Earthquakes
- Individual property (homeowner jewelry, furniture, electronics)
- Intentional Acts: If a board member vandalizes someone’s property or steals from the association’s bank account, the HOA insurance will not cover their actions.
Does Your HOA Need To Add Additional Coverage?
- Does your neighborhood have an expensive clubhouse or gym?
- Do you live in a state with hailstorms or along the Gulf Coast?
- Does your board make financial decisions that affect dozens of homeowners, such as renovations?
Any “Yes” response indicates you may want to consider having your HOA insurance policy reviewed by a professional.
How To Manage An Insurance Claim
When disaster strikes, timely preparation and communication are key. Follow these steps to ensure your HOA insurance coverage does not lapse:
- Prevent further damage if possible. (Tarp a damaged roof)
- Take before photos of the damage.
- Call your agent to report a claim.
- Get 3 bids from qualified vendors.
- Communicate with your community about affected common areas.
Need Help Finding HOA Insurance? Call on SBB Management
Figuring out how much insurance your homeowners association needs can be daunting. There is a lot of expertise involved in understanding state laws and planning for worst-case scenarios. We understand how overwhelming homeowner’s association insurance can be, which is why SBB Management Company is here to help.
SBB Management has the experience and expertise to help you navigate community association insurance and finances. Our team has been serving Texas homeowners since 1983 in the Dallas-Fort Worth and Houston markets, and will work with you to mitigate risk and keep your community values high.
We don’t just find your HOA insurance, we find you the best HOA insurance. Period.
SBB Management Company prides itself on providing “quality over quantity” services to every community we serve. From lifestyle services to financial management services, we can help with anything regarding your HOA amenities.
By working with a dedicated HOA management company, you gain access to our hyper-local knowledge of changing Texas Property Code laws. Our online portal gives your homeowners and board members real-time data and total transparency.
Whether you need a fresh take from seasoned volunteers or you’re a developer establishing your first community, we can provide the personalized service of real people who care about your success. Reach out to SBB today.
