October 9, 2018
Do Condo HOAs Have Insurance?
Do Condo HOAs Have Insurance?
By LLCR Staff

Among the more than 300,000 community associations in the United States, only about half maintain their insurance policy. Out of that half, only about 25 percent maintain adequate coverage.

This is problematic because HOA insurance is a crucial aspect of any community managed by an association.

If you want to make sure your current or potential condominium is insured sufficiently, here is everything you should know about condo HOA insurance.

What Kind of Insurance do Condo HOAs Have?

If you are living in a property managed by an HOA, the chances are that a portion of your mandatory monthly dues is helping to fund the homeowner association’s insurance policy.

To protect everything managed by the HOA, it is crucial that condo developments have what is called a master policy. Without this form of coverage, the HOA may levy special assessments on unitholders if an unexpected disaster was to occur and the building would need extreme repairs.

HOAs must be sure to also have hazard and liability insurance for specific areas of the condominium development, often including common areas, like stairwells and pools, and some exterior elements such as the condo’s roof.

Additionally, many homeowner associations purchase Directors and Officers Insurance as well as employee theft protection to ensure the financial security of the HOA and the people running the HOA.

What is the Insurance Meant to Cover?

Master policies generally cover damages and personal injury. The damages covered by a master policy involve damages to the shared property, which may be a result of storms, fires, criminals, etc. General liability insurance covers costs of any lawsuits for medical expenses filed by people injured in the common areas of the property.

Directors and Officers Insurance policies: This specific type of insurance covers both legal defense costs and damages if a homeowner decides to sue its HOA. This policy does not cover intentional misconduct.

Employee theft insurance can protect the association if a director, officer or property manager embezzles HOA funds.

How can you Check that your HOA has the Right Insurance?

To ensure that your homeowners’ association has sufficient coverage, it is critical to thoroughly review your community’s master insurance policy. Check to see what the policy covers in case of emergency and what your HOA is responsible for.

It is also helpful to make sure that the HOA governing documents do not conflict with your HOA master policy regarding the HOA duties to the unitholders.

Now that you have more insight into the importance of HOA insurance, be sure that your potential condo HOA is adequately insured before you purchase.

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