When you move into a new condominium or HOA community, fees will be there to welcome you along with new neighbors. Most people pay home or condominium insurance as mandated by the terms of their mortgage. This will be in addition to any association dues you are responsible for. A portion of these dues is usually spent on insurance for the community. Exactly what is covered by your HOA insurance will vary from community to community, but usually includes coverage for common areas and amenities such as pools, green space, or the condo building itself. It is important that homeowners and board members alike understand what HOA insurance covers so they can make the right choice on individual insurance and be prepared for the worst.
How HOA Insurance Services are Paid For
Typically, HOA dues are collected and stashed in two accounts: the operating fund and reserve fund. The reserve fund typically covers major expenses like renovations and emergency maintenance. The operating fund, on the other hand, covers regular expenses like routine repairs and maintenance on the common areas and structures in your community. HOA insurance services are paid for by member fees through the operating fund.
What HOA Insurance Services Cover
The cost and coverage of insurance services will be different in a community of single-family homes than in a condominium complex where more common areas will exist. In a single home neighborhood, there will be limited coverage for individual properties. Typically, homeowners will be responsible for insuring their own homes and the land they sit on.
In a condo, HOA insurance services will typically be more comprehensive and liability will be more complicated. Areas that should be covered by your HOA insurance policy include stairways, shared walls, roofs, lobbies, elevators, gyms, pools, ponds or lakes, playgrounds, and party areas. Fire, wind, intruders, or excessive flooding can cause this damage. Usually, HOA insurance services in condos is described as “studs-out.” This means that everything outside of your walls is subject to the HOA’s insurance, while everything within your walls is your responsibility.
The specific HOA insurance services should be laid out in the bylaws or CC&R’s of the association. You should double-check both policies to make sure there is no overlap on coverage. Don’t pay for the same thing twice!
In terms of personal injuries, general liability insurance is critical for your HOA to have in case someone is hurt or injured in a common area of the community. This insurance will cover any legal are medical expenses that may arise as part of the accident. Liability insurance is essential because a severe injury on a sidewalk, pathway, or more commonly at a community pool can result in huge settlements that your HOA must be prepared to cover.
This insurance can also cover the officers and directors of your HOA. This protects against carelessness or the mishandling of reserves that put the personal finances of board members at risk.
Finding HOA Insurance Services
Remember, the main role of an HOA is to act in the best interest of its members, so everyone’s investment is protected. Not having sufficient insurance can financially setback your community and goes against the purpose of a homeowners association. Without the right insurance services, the homeowners themselves may have to come out of pocket to pay the tab. As one could imagine, this is the last thing you want to happen to your HOA.
Luckily, finding good insurance services doesn’t have to be hard. Many reputable HOA management companies can advise on what services you need, and many will provide insurance as part of your agreement. Cedar Management Group is no exception. For more guidance on how our services can ensure your HOA has the right insurance, contact us online or by phone at (877) 252-3327. We’ll be happy to guide you through the process!