Ah, insurance. You don’t need it until you need it. Excellent quality insurance coverage is necessary to protect your community association from some of life’s worst rainy-day situations. Without the proper coverage, you risk paying damage, loss, theft, or legal fees out of your HOA funds or even being held personally liable as a board member.
With the unusual circumstances of the last few years, insurance companies are adjusting their coverages and requiring more from their association clients regarding increased premiums and tighter underwriting restrictions. You may be wondering how these changes will affect your community association insurance coverage and what you can do about it.
We went right to the source to find the latest insurance information. We talked with Megan Owenby, Vice President, Community Association Division at Brown & Brown Insurance, for her expert insight.
Q: Megan, what are you seeing in the industry right now?
MO: Today’s insurance marketplace is narrowing. Carriers are tightening their requirements and increasing premiums, exiting from the association insurance sector, or withdrawing from the market altogether.
We expect association requirements to generally expand and some to even mandate recent reserve studies and healthy reserve accounts. On the positive side, carriers are starting to recognize the efforts associations are making to mitigate claims to their properties by implementing more protective measures and are beginning to provide discounts in response.
Q: What types of insurance coverage does a community association need?
MO: For well-rounded coverage, I suggest the following:
- Property Insurance: Insures your common community property and buildings from typical damage like falling trees.
- General Liability: Protects your association against personal injury allegations by someone on your property.
- Fidelity Insurance: Also known as a fidelity bond, protects the association in the event of theft or embezzlement of financial assets by someone with access to the association funds.
- Directors & Officers (D&O) Liability: Protects board leadership against legal fees associated with residential disputes and lawsuits against the association. It covers individual board members in these types of situations.
- Workers Compensation Coverage: For larger associations with employees, you can add this coverage to your HOA insurance policy to cover employee injury claims.
- Umbrella/Excess Liability: Provides additional liability limits on the primary General and D&O Liability policy for larger properties or if you have a specific need for expanded coverage.
- Cyber Liability: Now more important than ever with ransomware and other attacks.
Q: How often should we review coverage?
MO: It’s good practice to review your current coverage each year. Consider what your association has recently experienced and any future insurance needs.
Q: How can community associations save money now and in the future on their premiums?
MO: The total cost for your HOA insurance policy will generally depend on the number of shared areas, the coverage level you need, and the terms of your insurance provider. Additionally, I always suggest my clients do the following to ensure they get the best rates.
- Keep Your Property Well Maintained: Rates can also increase for properties as the structures and equipment become older. Proactively maintaining your community will ensure it ages well, and it can also save money on your insurance premiums.
- Definite Policies and Procedures: Make sure clear and concise policies and procedures are in place, especially policies about residential complaints.
- Clear Communication and Full Transparency: An annual residential meeting to set expectations and review services covered in members’ dues is a great way to establish communication and mitigate problems.
- Listen and Respond Quickly to Complaints: Don’t kick the can down the road. If residents complain, associations need to listen and respond appropriately to reduce legal action.
An easy way to gain insights into the right amount of coverage and get the best rate is working with a reputable local broker or national firm with specific experience covering community associations.
Working with trusted association experts means you get the best information and service with the least amount of stress.
If you have questions about association insurance, you can contact Megan Owenby by email at email@example.com