To fulfill its duties to the association, the board should run the HOA as diligently and professionally as it would manage a business. This includes choosing the proper insurance policies to protect the HOA’s assets and cover the HOA in case of liability.
To assist the board in knowing what kinds of insurance policies to purchase and why, let’s review the types of insurance HOAs commonly need and what they cover.
Commercial Property Insurance
Commercial property insurance provides coverage for the HOA’s buildings and property, such as the HOA’s community clubhouse, pool furniture, and exercise equipment.
Some property losses, such as damage caused by a flood or an earthquake, may not be covered by a commercial property insurance policy. That’s why it’s important for the board to review an insurance policy with an insurance agent to understand what’s covered before signing.
Commercial General Liability Insurance
Commercial general liability insurance is another important kind of insurance that an association should have. It covers injuries to other people or damages to their property that happen because of the HOA’s negligence, such as slip and fall accidents and injuries that occur at community pools and playgrounds.
Workers’ Compensation Insurance
It is important for an HOA to choose a workers’ compensation policy that will cover its board members, committee members, and other volunteers, as well as any paid employees the association may have. This kind of insurance will protect the HOA financially if a volunteer or employee is injured on the job and the HOA is liable for medical bills.
Directors and Officers Insurance
Directors and officers insurance covers claims made against board members for actions they took or decisions they made while fulfilling their duties as a board member, such as mistakes and errors in judgment. Mistakes happen sometimes, and directors and officers insurance helps protect HOA volunteer board members when they do. This policy may also cover the HOA’s employees and management company.
The HOA should purchase commercial vehicle insurance for any vehicles the association owns. If HOA volunteers and employees drive their personal vehicles to complete their responsibilities, such as driving the family car to a board meeting or transporting new folding tables to the clubhouse in one’s personal truck, the HOA can purchase hired and non-owned auto insurance.
In a collision, a commercial vehicle insurance policy will cover the other driver’s injuries and damages to the other driver’s vehicle, as well as damages done to the HOA’s vehicle. With the appropriate vehicle insurance, the HOA can also gain coverage for damage caused to the HOA’s vehicle due to theft, vandalism, road debris, and the like.
A hired and non-owned auto policy covers damages and/or injuries an HOA’s employee or volunteer causes to someone else’s vehicle and/or person in a collision, but only if those damages go beyond what the HOA employee’s or volunteer’s personal auto policy will cover.
An HOA may purchase additional types of insurance, such as fidelity insurance, cyber insurance, and flood insurance, to cover losses the HOA’s general liability policy and property insurance policy don’t.
Fidelity insurance protects the HOA from criminal acts committed by volunteers and employees against the association, such as a committee member who steals association funds.
Cyber insurance covers losses caused by data breaches, computer viruses, and the like, which is important for HOAs that store information online, keep digital HOA records, or have a website that houses confidential homeowner and HOA information.
Lastly, flood insurance provides the HOA with coverage in the event its property is damaged due to flooding. Some HOAs may be required to carry flood insurance, and it is not typically included in general property insurance policies.
That concludes our breakdown of the different types of HOA insurance and why an HOA may need them. For guidance on selecting the policies that are right for your association, reach out to a Blue Lime Insurance Group team member. We’d be happy to help!