Homeowners Association Insurance Policy Information
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, Homeowners Association 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 homeowners association insurance coverage you need to secure.
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.
Below are some answers to commonly asked HOA insurance questions:
- What Is Homeowners Association Insurance?
- How Much Does Homeowners Association Insurance Cost?
- Why Do HOAs Need Insurance?
- What Type Of Insurance Do Homeowners Associations Need?
- What Does Homeowners Association Insurance Cover & Pay For?
What Is Homeowners Association Insurance?
Homeowner's Association (HOA) insurance is a type of insurance that provides coverage to a homeowner's association and its members.
This type of insurance typically includes property damage coverage, liability coverage, and insurance for common areas. The HOA insurance covers the costs of repairs or replacements of community buildings, amenities, and infrastructure in the event of damage or destruction caused by natural disasters, theft, or other unexpected incidents. It also covers the costs of any legal liabilities that the HOA may face, such as personal injury claims made by residents or visitors to the community.
The premium for HOA insurance is usually included in the monthly or annual HOA fees paid by residents.
How Much Does Homeowners Association Insurance Cost?
The average price of a standard $1,000,000/$2,000,000 General Liability Insurance policy for small homeowners associations ranges from $57 to $79 per month based on location, number of homes, common property acreage and features, claims and more.
Why Do HOAs Need Insurance
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 HOA will ultimately determine what type and how much homeowners association insurance coverage is needed.
What Type Of Insurance Do Homeowners Associations Need?
The master policy, which is the 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 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 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.
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.
What Does Homeowners Association Insurance Cover & Pay For?
Homeowners Associations (HOAs) can be sued for various reasons, including:
Failure to maintain common areas: If an HOA fails to maintain the common areas of a community, such as sidewalks, roads, or playgrounds, and someone is injured as a result, the HOA may be sued for negligence. Insurance can help pay for the lawsuit by covering the costs of legal defense, settlements, or judgments.
Discrimination: If an HOA discriminates against someone based on their race, religion, gender, or other protected characteristic, the HOA may be sued for violating fair housing laws. Insurance can help pay for the lawsuit by covering the costs of legal defense, settlements, or judgments.
Breach of contract: If an HOA breaches a contract with a homeowner or a vendor, the aggrieved party may sue the HOA for damages. Insurance can help pay for the lawsuit by covering the costs of legal defense, settlements, or judgments.
Mismanagement of funds: If an HOA mismanages its finances, such as by embezzling funds or failing to properly account for them, the HOA may be sued by homeowners or creditors. Insurance can help pay for the lawsuit by covering the costs of legal defense, settlements, or judgments.
Property damage or personal injury: If someone is injured or their property is damaged due to the negligence of an HOA or its members, the HOA may be sued for damages. Insurance can help pay for the lawsuit by covering the costs of legal defense, settlements, or judgments.
HOAs typically have insurance policies that cover various types of lawsuits, including general liability insurance, directors and officers (D&O) insurance, and property insurance. General liability insurance can help pay for lawsuits related to property damage or personal injury, while D&O insurance can help pay for lawsuits related to mismanagement or discrimination. Property insurance can help pay for lawsuits related to damage to the common areas.
However, it is important to note that insurance policies may have limits on the amount of coverage they provide, and not all lawsuits may be covered. Additionally, some policies may have exclusions or limitations that may affect coverage for certain types of claims. Therefore, it is important for HOAs to carefully review their insurance policies and work with their insurance agents to ensure that they have adequate coverage for their specific risks and exposures.
Commercial Insurance And Business Industry Classification
- SIC CODE: 8641 Civic, Social, and Fraternal Associations, 6531 Real Estate Agents and Managers
- NAICS CODE: 813990 Other Similar Organizations (except Business, Professional, Labor, and Political Organizations)
- Suggested Workers Compensation Code(s): 9012 Building or Property Management - Property Managers and Leasing Agents & Clerical, Salespersons, 9015 Building or Property Management - All Other Employees
8641: Civic, Social, and Fraternal Organizations
Division I: Services | Major Group 86: Membership Organizations | Industry Group 864: Civic, Social, And Fraternal Associations
8641 Civic, Social, and Fraternal Organizations: Membership organizations engaged in civic, social, or fraternal activities. Membership sports and recreation clubs are classified in Industry Group 799, and insurance offices maintained by fraternal organizations are classified in Insurance, Major Group 63. Homeowner, tenant, and condominium associations primarily engaged in managing real estate are classified in Real Estate, Industry 6531.
- Alumni associations and club
- Bars and restaurants owned and operated for members of
- Booster clubs
- Business persons clubs, civic and social
- Civic associations
- Community membership clubs, other than amusement and recreation
- Condominium associations, except property management
- Fraternal associations, other than insurance offices
- Fraternal lodges
- Fraternities and sororities, except residential
- Homeowner associations, except property management
- Parent-teacher associations
- Singing societies
- Social club, membership
- Tenant associations, except property management
- University club
- Youth associations, except hotel units
6531: Real Estate Agents & Managers
Division H: Finance, Insurance, And Real Estate | Major Group 65: Real Estate | Industry Group 653: Real Estate Agents And Managers
6531 Real Estate Agents & Managers: Establishments primarily engaged in renting, buying, selling, managing, and appraising real estate for others.
- Agents, real estate
- Appraisers, real estate
- Brokers of manufactured homes, on site
- Brokers, real estate
- Buying agents, real estate
- Cemetery management service
- Condominium managers
- Cooperative apartment manager
- Escrow agents, real estate
- Fiduciaries, real estate
- Housing authorities, operating
- Listing service, real estate
- Managers, real estate
- Multiple listing services, real estate
- Real estate auctions
- Rental agents for real estate
- Selling agents for real estate
- Time-sharing real estate: sales, leasing, and rentals
Homeowners Association Insurance - The Bottom Line
To find out exactly what type ofHomeowners Association insurance you need and how much coverage you should have, speak to an experienced insurance agent to go over your all your HOA's options.
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
- Contractors Equipment
- Duplex Rental Property
- Equipment Breakdown Protection Insurance
- Homeowners Association Insurance
- Inland Marine
- Jewelers Block
- Manufacturing And Mercantile Rental Property
- Mobile Home Park
- Non-Residential Building Operators
- Office Buildings
- Shopping Center & Strip Mall
- Vacant Land
- Vacant Property
- Specialty Habitational
- Specialty Inland Marine
- Specialty Property
Commercial property insurance is a type of insurance that provides coverage for businesses against losses or damages to their business property. This can include buildings, equipment, inventory, and other assets owned by the business.
There are several types of commercial property insurance, including standard property insurance, business interruption insurance, and contents insurance.
- Standard property insurance covers damages to the physical structure of the business, such as the building, walls, and roof.
- Business interruption insurance covers lost income and expenses incurred during the repair or rebuilding process.
- Contents insurance covers damages to personal property within the business, such as office equipment and furniture.
Commercial property insurance is important for businesses of all sizes, as it helps protect against financial losses due to unforeseen circumstances, such as natural disasters, theft, or vandalism. It can also provide liability coverage in case of accidents or injuries on the business property.
To determine the appropriate level of property insurance for a business, it is important to consider the value of the business's assets, the location of the business, and the potential risks it faces. Many businesses choose to work with an insurance agent or broker to help identify the best coverage options for their specific needs.
Overall, commercial property insurance is a crucial part of any business's risk management strategy, helping to protect against financial losses and ensuring the long-term viability of the business.
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.