What is an HOA?
A homeowners association (HOA) is an entity that sets and enforces rules within a community. Those who own property in the community become members of the HOA and pay dues. Oftentimes the HOA owns property, which can include the buildings in which members live.
HOA Insurance Overview
Homeowners association insurance covers the property the HOA owns, including HOA funds, as well as certain liability exposures. It can also the board members as individuals. These insurance policies are referred to as master policies.
HOA Insurance: Who is it for?
- Homeowners Associations
- Condo Associations
- Planned Unit Developments
- Community Associations
Why does an HOA need insurance?
If the HOA owns property, that property must be covered against perils such as fire, wind or water damage. Also, HOA funds could be embezzled. Finally, the HOA could be sued for negligence if someone was injured on HOA property, or board members, directors and officers could be sued as individuals for wrongful acts.
What HOA coverages are required, and by whom?
The HOA’s governing documents contain most insurance requirements. Typically lender requirements follow these requirements, however lenders also have requirements surrounding crime coverage. Below are a few of the common requirements.
- Property – Some HOA’s require that the master policy cover the homes/condos and some do not. If they do not, then each homeowner must carry a homeowners policy. If they do, then each homeowner must carry a condo (HO6) policy. Furthermore, some HOA’s require that the master policy cover permanently attached property within the units (walls-in) and some do not (walls-out). Either way, if the HOA owns property, then the HOA must insure that property. Sometimes that property must be insured at agreed value (no coinsurance clause) or with guaranteed replacement cost.
- Liability – Typically liability coverage must be provided for both the HOA as well as for board members, directors and officers.
- Crime – Lenders require that association funds be covered against embezzlement. This is accomplished through a fidelity bond or through employee dishonesty coverage.
What are some of the other coverages available?
- Ordinance – If the HOA experiences a loss that is severe enough to require permits to repair, the local government may require that the building be modified to adheres to current building codes. Ordinance coverage pays to rebuild (ordinance A), demolish (ordinance B), or upgrade (ordinance C) if it is required by law.
- Income – Covers HOA fees that are uncollectable, and any extra expenses associated with a loss that renders condominium units uninhabitable.
- Sewer & Drain – Offers insurance coverage if, for example, a toilet, tub or sink overflows and damages the condo building.
- Earthquake and Flood – These coverages typically are not included in a package policy, and must be purchased separately.
Contact Chris Elliott Insurance Agency!
We have insured over 100 condo associations, some of which have been with our agency for over 15 years. Chris is a longtime HOA board member and member of the Community Associations Institute, which puts us in a unique position to understand the intricacies of condo associations and their master insurance policy. We access insurers brokers cannot, and often offer superior premiums and coverage, to include guaranteed replacement cost and broad directors & officers coverage. Some of the services we provide include ensuring coverage meets CC&R requirements and is updated to keep up with increasing building costs (without overcovering), assessing losses to determine whether filing a claim warrants any potential surcharge, processing certificate requests within hours, working with underwriting to ensure all available discounts and credits are applied, and coordinating with property managers.