Assets change in a homeowner association just as they do in single-family homes. Property values rise. Additional common areas may be built or renovated. There are new industry trends. Having the insurance coverage you need in the areas in which you need it is a big challenge for HOAs.
Regular insurance checkups are important in revealing ways to save money as well as the ensuring you have the right coverage(s). Here are some checkup tips to help you assess your current insurance.
1. Check your governing documents before starting your checkup. Are you following the requirements set forth? Some associations have more coverage than the law requires due to provisions in the governing documents. If you want to provide less inclusive coverage or reduce insurance coverage as a way of lowering premiums, you should amend your governing documents first.
2. HOA Insurance Agent. Homeowner association insurance is different from other types of insurance. Choose an insurance agent with expertise in HOA insurance. Their experience is valuable to helping your Board assess appropriate insurance coverage.
3. Deductibles. Is your current deductible still in line with needs and objectives of the community? Many associations have chosen to move to higher deductibles to reduce premiums. If you decide to increase deductibles, review your reserve fund to ensure it is adequately funded for the extra deductible amount(s).
4. Workers’ compensation (WC). This coverage is necessary even for HOAs that do not have any employees. WC insurance provides coverage to workers who are injured on a job, which prevents the association from paying for a work-related injury.
5. Directors and Officers liability coverage (D&O). These policies cover the association’s Board directors and officers, protecting against personal losses that may result from alleged errors in judgment and/or business decisions that were made in good faith during the course of their work for the association.
6. Co-insurance clause. If your structure(s) are insured for less than the amount your insurance considers full coverage, it may impose a co-insurance penalty when you file a claim. This reduces the payout for your claim. In addition to checking to coverage amount to make sure you don’t shortchange the association, you should also check for a co-insurance clause and request that the clause be removed.