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Like an actual umbrella in a sudden deluge of rain, an umbrella insurance policy can protect your association from unexpected costs associated with a claim or settlement.

Umbrella coverage is essentially what it sounds like – extra coverage put in place to supplement an association’s primary liability policies.

How Does Umbrella Coverage Work?

When a claim exceeds the limits of primary policies, the umbrella coverage kicks in to cover the excess. Umbrella coverage is highly recommended, especially in communities with commonly-shared amenities such as pools, playgrounds, parks, fitness centers, or ponds where there is higher chance of accidents or incidents.

Why Do We Need Umbrella Coverage?

Even if you feel your basic policies have you covered, it’s still a good idea to consider umbrella insurance. Whether to make recompense for a large settlement in which an HOA has been deemed responsible for an unforeseen accident or disaster, or a large claim against the Directors & Officers Policy (D&O), an umbrella policy is the best and most cost-effective way to more fully protect an association.

When a Settlement Exceeds Coverage

For the amount of coverage you receive, the cost of an insurance policy is relatively low.  With that being said, in the event that a settlement exceeds the amount covered by an association’s umbrella policy, the remaining portion will still need to be paid, and the homeowners/members of the association will be equally assessed to pay the difference!

If there is a $4,000,000 judgment against an association, and their liability limits are only $1,000,000, this leaves a remainder of $3,000,000. If the association has 300 homes, each homeowner will be assessed $10,000!

To avoid unexpected financial strain on the association – and to prevent individual homeowners from being assessed for portions of the lawsuit – it’s important to consult with a qualified agent to ensure that you have the right amount of coverage and remain protected in any event.

Don’t be Left in the Dark!

If you’re not sure if your HOA has umbrella coverage, or you’re left wondering if your umbrella coverage is enough to cover the potential risks your association faces, the experts at Blue Lime Insurance Group would love to help! Our insurance experts can customize insurance plans tailored to your HOA’s specific needs. Contact us today!


We also recommend homeowners be sure they have Loss Assessment Coverage on their personal homeowner’s policy; this may protect them in the rare and unfortunate circumstances outlined in the example above. This is not a coverage the association buys – it is a coverage that each homeowner would have to hold. In many cases, it is thrown in to a homeowners’ insurance policy, but not always.

Homeowners should contact their personal insurance agent to verify coverages.