California Homeowners Association Insurance Policy Information
California Homeowners Association Insurance. Homeowners associations (HOAs) have very unique insurance needs. Though the property faces the same risks and perils as other types of properties, the parties responsible for covering the various elements of the property differ.
All individual unit owners form the membership body of condominium, homeowners and townhouse associations. While condominiums can be commercial or residential homes, townhouses are generally residential only. Each individual unit owner owns a particular unit, then each has a shared financial responsibility for the overall maintenance and upkeep of common areas, such as clubhouse, the grounds, elevators, exterior walls, foundations, hallways, HVAC systems, outside fixtures, parking areas, recreational facilities, roofs, and swimming pools. The association's bylaws will state exactly what is owned by each individual member and what is owned by the association.
The unit owners either elect or hire association leadership to coordinate common maintenance and upkeep activities. The association’s officers are responsible for hiring employees or contracting with others to provide the needed services. The officers are also responsible for administrative operations, including setting and enforcing rules for the association membership. The association is also responsible for the determination, collection and disbursement of any necessary assessments for maintenance, upkeep and insurance.
For example, each individual who lives within the community owns a portion of the building that he or she lives in. As such, residents are responsible for securing insurance coverage for their actual units; however, common areas, such as swimming pools, sidewalks, garages, walkways, and other shared spaces are the responsibility of the homeowner's association. This means that the HOA is responsible for insuring these shared spaces.
If you own a community that is governed by a homeowner's association, it is important that you understand the role of the HOA and what type of California homeowners association insurance coverage you need to secure.
California homeowners association insurance protects your HOA from lawsuits with rates as low as $57/mo. Get a fast quote and your certificate of insurance now.
The Role Of A CA Homeowner's Association
A homeowner's association is an organization within a residential community that establishes and enforces rules that the property owners who live within the community must abide by. The association is not only responsible for making sure that rules are upheld, but also manages expenses for the community, makes repairs to common areas, and ensures that the property has the right type of insurance coverage in the event of a loss.
The HOA also establishes rules that are intended to govern the community. These rules also outline the insurance requirements for the homeowner's association, which includes the particular requirements for coverage for the community, including the types of coverage, the coverage limits, and the deductibles, that the HOA is required to purchase.
The HOA insurance covers the shared risks of those who own units within the community. All of the buildings and the common spaces within the community are covered under a single policy, known as a master policy. The rules that the association establishes and the master policy dictate which aspects of the complex the HOA insured and which parts those who own units within the community are required to insure.
With that said, the CA HOA will ultimately determine what type and how much California homeowners association insurance coverage is needed.
What Does A CA HOA Policy Typically Cover?
The master policy, which is the California homeowners association insurance policy, covers several things. Some of the most common things that are typically covered under this policy include:
- Property: Any shared property within the community should be covered by the homeowner's association. This includes areas like sidewalks, parking lots, garages, hallways, elevators, basements, roofs, swimming pools, fitness centers, and meeting rooms. It should also cover any equipment that the community shares, such as boilers, oil tanks, and hot water heaters.
- Building Coverage: Though it is usually the responsibility of the individuals that own the units within the community, the HOA mater policy should provide insurance coverage for buildings. Generally, there are three types of building coverage that a master insurance policy will offer, which include:
- Bare Walls: This insurance covers basic elements of the buildings, such as roofs, walls, floors, and elevators. The owners of each unit have to cover things within their units, such as flooring, appliances, fixtures, and furnishings. With bare walls coverage, residents may also have to insure the interior walls in their units.
- Single Entity Coverage: This coverage insures the standard elements of a building, as well as some standard finishes within the units, excluding the personal property of the residents.
- All-In Coverage: This type of insurance covers fixtures, additions, installations, and improvements inside the units. It's considered comprehensive coverage.
- General Liability: This type of insurance provides broad coverage for various types of incidents that can occur within the CA community, such as personal injuries and property damage. If a delivery person or resident slips and falls on a walkway, general liability insurance will cover the cost of any damages. If someone claims that their property was stolen or damaged while on the shared spaces of the HOA and files a lawsuit, general liability insurance will also cover the damages.
- Directors & Officers Liability: Did you also know that as a director, officer, trustee, employee or even a volunteer of a community homeowner association, you can be held personally liable for decisions and actions made on behalf of your association? This HOA coverage protects members of the association board against claims alleging wrongful acts in carrying out their duties.
The goal of a homeowners association is to ensure that the CA community it governs is safe and secure. That's why it's important for HOAs to purchase to make sure that they are properly insured.
CA Homeowners Associations - HOA's Risks & Exposures
Premises liability exposure comes from use of the communal areas as the association is responsible for all maintenance and upkeep. All buildings should meet life safety codes regarding smoke and fire detection, fire extinguishers, and carbon monoxide detectors. To prevent slips and falls, all premises must be well maintained.
There should be no frayed or worn spots on carpet, and no cracks or holes in flooring. Steps and uneven floor surfaces should be prominently marked. Sufficient exits must be provided and be well marked with backup lighting systems in case of power failure. Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. Balconies should be regularly inspected and maintained.
Swimming pools, exercise facilities, and playgrounds should be limited to members and their guests and properly maintained. There should be a maintenance activity log to document the association's response to unit owners' needs. Personal injury losses may occur due to alleged discrimination or invasion of privacy.
Directors and officers exposure is from actions and decisions made by the elected officers of the association. The exposure can be minimal when all responsibilities are shifted to an outside management firm. If the association operates without outside assistance, the association and its individual officers can be held liable for adverse actions such as discriminatory practices, failing to maintain the property in a responsible manner, or mismanagement of shared escrow funds. Policies and procedures should be published and consistently followed.
Workers compensation exposure is nonexistent if the association contracts all services to an outside management firm. If there are employees, office workers may develop repetitive motion injuries such as carpal tunnel syndrome. Maintenance workers can experience cuts, burns, back sprains from lifting, and exposure to machinery used for lawn maintenance and other repairs.
Skin and lung irritations can result from working with cleaning chemicals and paint. Animals owned by unit owners can bite or kick workers. Any contract with outside firms must specify who is responsible for providing workers compensation coverage to the workers. If the subcontracting firm is responsible, the condominium association should obtain certificates of insurance to verify that coverage.
Property exposure consists of the buildings, grounds, swimming pools, parking areas, and other property jointly owned by the association's members. The bylaws of the association will specify what is owned by the association and how it must be insured. Ignition sources include electrical wiring, heating and air conditioning systems, and cooking equipment within residential units. There should be hard-wired smoke or fire alarms in all units and common areas. Personal property is limited to the office and furnishings in the community building.
Crime exposure comes from employee dishonesty in the handling of the escrowed funds to be used for maintenance and repair. Employee dishonesty is controlled through background screening, disciplined controls, and division of duties.
Inland marine exposure comes from accounts receivable for association fees and assessments due, computers, and valuable papers and records for association and owners' information. Duplicates of all records should be made and kept off premises for easy replication in the event of a loss. Lawn equipment may be considered contractors' equipment, but is usually included as building property.
Business auto exposure is generally limited to hired and non-owned for employees running errands. If a maintenance vehicle is owned by the association, all drivers must have licenses appropriate for the vehicles driven and acceptable MVRs. All vehicles must be maintained with records kept in a central location.
California Economic Data, Regulations & Limits On Commercial Insurance
If you are an entrepreneur and you considering having your operations located in California, it's essential that you have a full understanding about the economy of the state, as well as the regulations and limits that are in place for commercial insurance.
If you are considering opening up a business in the Golden State, you first want to make sure that it is a sound location for your operations. That means that you should understand some key information related to the state's economy, as well as the types of insurance coverages that businesses are legally required to carry.
Economic Trends For Businesses In California
In terms of job creation, the state of California exceeds rate of job growth in the United States; however, as the state's metropolitan areas are reaching employment capacity, job growth is starting to slow. In 2017, the rate of growth was 2.1 percent, which is the slowest rate of growth since 2011; but it is still expected to increase by 1.8 percent by the end of 2018, and 1.2 percent by the end of 2020.
In the month of April, the unemployment rate in California dropped to 4.2 percent, which is a record low. This unemployment rate is expected to remain consistent for the rest of the calendar year; however, it's forecasted that the rate will start to increase in 2020.
The strongest labor market in the state is in the Bay Area, where the unemployment rate was 3.4 percent in 2017. Southern California follows, with an unemployment rate of 4.5 percent in 2017. In the Central Coast region, the rate was 5.4 percent and in the Central Valley, it was 6.6 percent. While the unemployment rate is considered high in these areas, they have decreased dramatically over the last 12 month period.
The industries that are expected to see the most growth in CA include:
- Information Technology
CA Commercial Insurance Regulations And Limits
The California Department of Insurance regulates insurance in the Golden State. In the state of CA, commercial liability insurance is not required; however, since the state does not cap rewards for liability law suits, business owners are wise to invest in this type of coverage. The amount of coverage recommended varies depending on the size of the business and in the industry.
Workers' compensation insurance is the only type of coverage that business owners are required to have. This applies to any organization that employs a salaried or hourly staff, even if that staff only consists of one employee. Furthermore, if an employee is injured or becomes ill as a result of work, business owners must pay for CA workers' comp benefits.
Additional Resources For Commercial Property Insurance
Read up on small business commercial property insurance, including how business property insurance protects your company's building's and/or their contents from damage, destruction, theft and vandalism.
- Apartment Building
- Business Interruption
- Commercial Flood Insurance
- Commercial Property
- Condo Association
- Equipment Breakdown Protection Insurance
- Homeowners Association Insurance
- Inland Marine
- Manufacturing And Mercantile Rental Property
- Mobile Home Park
- Non-Residential Building Operators
- Office Buildings
- Shopping Center & Strip Mall
- Vacant Land
- Vacant Property
Rental property owners, real estate developers and property managers should keep an accurate survey of each property they own or that is in their care. This survey should include inventories of furnishings and equipment at those properties. These documents establish the extent of their insurable interest, facilitate the arrangement and placement of insurance and minimize controversy and confusion if a loss occurs.
Insurance coverage on property, general liability and professional or errors and omissions liability should be arranged and placed for every real estate and rental property risk.
The main goal of any commercial property insurance program is to protect the insured's real and business personal property. Buildings and their contents property usually represents a significant portion of its total assets, regardless of the size of the business. A commercial property program can provide the coverage you need if a loss should occur.
The ISO Commercial Property Building and Personal Property Coverage Form is an insurance industry standard that provides this needed coverage. As a result, it should always be reviewed and used as a benchmark for comparison when evaluating any commercial property coverage form.
This policy treats business personal property as more than just the contents of a building. When there is a limit of insurance on the declarations, property can be covered if inside the building or structure or within 100 feet of the building or premises and either in the open, or even in or on a vehicle.
There are many endorsements available to tailor the ISO Commercial Property Coverage Forms. Some are mandatory for all policies while others are mandatory for specific classifications and types of business. Others are optional and permit a standard form to be customized to meet a specific risk's coverage needs. Endorsements broaden, restrict, delete, modify, or add coverage.
These policies can provide the following additional coverages for small specific limits of insurance: debris removal, preservation of property, fire department service charge, pollutant clean up and removal, increased cost of construction and electronic data.
Minimum recommended small business insurance coverage: Building, Business Personal Property, Business Income and Extra Expense, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, Signs, Valuable Papers and Records, General Liability, Employee Benefits, Umbrella, Hired and Non-owned Auto & Workers Compensation.
Other commercial insurance policies to consider: Earthquake, Equipment Breakdown, Flood, Computer Fraud, Forgery, Contractors' Equipment, Fine Arts, Cyber Liability, Employment-related Practices, Automobile Liability and Physical Damage, and Stop Gap Liability.
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