Here’s a frightening fact: every year in the United States, $50 billion is lost in workplace crime against small and medium-size businesses. One of the most common crimes committed? Scams!
Because they are largely run by volunteers, and generally have substantial amounts of money in reserve for community expenditures, HOAs are particularly vulnerable to fraudulent crime. So how can an association protect itself from falling victim to a scam or fraudulent activity, and what can be done to ensure they’re covered if such an event occurs?
Crime & Fidelity Insurance
This coverage protects the active and reserve funds held by the HOA from scams such as embezzling, check fraud, false invoices, computer and wire fraud, and third-party crimes.
Before obtaining Crime and Fidelity Insurance, the association should refer first to state law and the association’s covenants and/or bylaws to determine the amount of coverage needed.
Misuse of Funds by a Board Member
One common question asked when discussing HOA scams is if Crime & Fidelity Insurance covers misuse of funds by the board. The answer is a resounding “No!”.
Embezzlement or other fraudulent actions made by an HOA board member would instead be covered by an Employee Dishonesty Policy, which is separate from Crime and Fidelity coverage.
Insurance Coverage for Vendor Scams
HOA management should be aware that, with so many vendor bills and community needs to fulfill, this kind of fraud is not always easily detected. Unfortunately, being taken advantage of is a real possibility!
In the event that money is lost to a scammer, proper Crime and Fidelity coverage should be sufficient to cover and recoup the maximum funds possessed by the association at that time.
Prevention Is Key
It’s imperative for HOAs to ensure that proper coverage is in place to prevent loss in the event of a scam.
Blue Lime Insurance is committed to getting you the right coverage at the right price. Contact us today to get started!