Every year, boards must sit down and choose their insurance options and preferences for their community. Picking the right insurance policy option for your association is a task that is hard to define: what constitutes as good insurance? What types of insurance should HOAs carry?
The good news is that there are basic steps you can follow with your board or community manager to ensure that you pick the best insurance policy for your association.
Check out our tips on how to select the best insurance for you:
Examine your state’s legal requirements for HOA insurance. Making sure you follow your state’s minimum standards for coverage is always the first place to start when shopping for insurance.
Review your association’s governing documents for more information on your association’s insurance minimums. Most governing documents will specify the minimum insurance amount required and the property that you must cover.
If your governing documents haven’t been reviewed by a professional in a while, it may be a good idea to speak with an attorney or insurance broker to make sure that the governing documents’ insurance minimums still accurately reflect the HOA’s true needs.
If no insurance minimums are written into your governing documents, we recommend working with an insurance agent and an attorney to set a minimum. Legally establishing a reasonable amount of insurance for your association helps protect your community from future insurance gaps.
Catalogue any additions and improvements to the HOA’s property. Most insurance policies will not cover additions unless they are factored into the total value of the property in question.
Know your insurance types. Knowing the most common forms of HOA insurance (often called riders) will help you determine what makes sense for your HOA. Familiarizing yourself with the policies most commonly associated with HOA insurance will also help you select insurance that isn’t boilerplate or prevent you from paying for things you don’t need.
See below for the most common insurance riders for HOAs to carry:
- Directors’ and officers’ liability insurance: this coverage is designed to protect board members from management mistakes. All non-profit organizations should consider D&O coverage for their serving members to protect the association, and the individuals inside it, from the financially devastating consequences of a lawsuit.
- Workers’ compensation: this coverage type protects individuals from lost wages and medical expenses if they’re injured while doing work for the association. Workers’ compensation is not just for HOAs who employ workers – volunteers count as employees. When it comes to receiving recompense for lost wages and medical costs, volunteers can also file claims against the association.
- General liability: these policies cover damages caused by acts or omissions. These policies often have aggregate limits, per occurrence limits, and sub limits.
- Umbrella policy: these policies provide higher limits that protect associations. The primary goal of the umbrella is to supplement your general liability policy.
- Commercial auto: this will protect the association from damage done by HOA vehicles.
- Fidelity: this type of insurance protects the association from internal theft of association assets or funds.
Start your renewal process early. The quoting process starts 90 days before your renewal is due. Starting the process as soon as possible will help the board receive all quotes in a timely manner.
Finance your premiums. Premiums for associations are large; spreading the premium out over the course of a year allows you to keep more cash on hand for any surprise expenses.
Ask your community manager for help. Your community manager can point you in the direction of a reputable insurance company.
Eventually, your association will face a claim. Working now to choose the best insurance for your needs and price point will help alleviate stress when that time comes. Following the above tips will you maximize your association’s protection.