Homeowners Association (HOA) Insurance

Homeowners Association (HOA) Insurance is a type of property insurance that protects a planned community or condominium complex.

HOA insurance is essential for protecting community and condominium common areas and amenities against property damage and liability claims. Coverage includes: 

• Damage to building exteriors, like walls and roofs.
• Shared spaces such as pools, playgrounds, and clubhouses.
• HOA-owned assets like equipment and furniture.

It also provides liability coverage for personal injuries or property damage in these areas, covering medical and legal expenses. Additionally, it includes Directors and Officers (D&O) Liability coverage, protecting board members from personal liability.

Crucial to the HOA's financial health, this insurance prevents depleting reserves or imposing special assessments for unexpected expenses. Ultimately, it ensures the community's well-being by maintaining its shared spaces and financial stability.

What does HOA Insurance cover?

In California, HOA Insurance typically covers the following:

• Property damage to common areas: This includes damage to the exterior of buildings, shared spaces like pools and clubhouses, and landscaping.
• Liability claims: This includes claims for personal injury or property damage that occur in common areas of the community.
• Directors and Officers (D&O) liability: This covers claims against HOA board members for their actions or decisions while serving on the board.

What does HOA Insurance not cover?

In California, HOA Insurance typically does not cover the following:

• Damage to individual units: This includes damage to the interior of units, personal belongings, and landscaping that is not part of the common areas.
• Bodily injury or property damage caused by individual homeowners: This includes claims for injuries or damage that occur within individual units or on private property. 
• Criminal acts: This includes vandalism, theft, and arson.
• Other coverage exclusions: Some common exclusions include earthquakes, floods, intentional acts, and wear and tear.

Who needs HOA Insurance in California?

HOA insurance is a type of commercial property insurance that is required for all homeowners associations in California. This includes:

• Single-Family Homes
• Condominiums
• Townhomes
• Planned Communities
• Cooperatives
• Timeshares
• Planned unit developments (PUDs)
• Commercial/industrial/professional associations
• Condominium hotels
• Other types of communities with shared ownership of property

Here are a few other critical coverage options that a California homeowners association is required to have in place.

Directors & Officers (D & O) Liability is insurance coverage for wrongful acts and allegations against the board of directors as well as the association. This coverage is also known as Errors and Omissions Liability as this coverage provides for these types of losses as well.

Typical D & O liability claims range from monetary to non-monetary, breach of contract to violation of CC&Rs, discrimination to libel/slander. 

Commercial Umbrella Liability Policies are an inexpensive way to extend liability protection beyond the limits of underlying policies. The reason an HOA would want to purchase a CUP is to both satisfy the Davis-Stirling Act General Liability insurance requirements and/or simply enhance the association’s limits of liability coverage. 

There are two types of insurance coverage within a CUP: Coverage A (Excess Liability) and Coverage B (Umbrella Liability). Excess Liability is actually the portion of the CUP that extends over the underlying liability insurance policies whereas Umbrella Liability provides first dollar coverage (sometimes minus a self-insured retention) when an underlying insurance policy excludes the loss and the CUP does not have a similar exclusion. The association should look to purchase a CUP that includes both Coverage A and Coverage B.

Crime insurance, also known as Crime and Fidelity insurance, is a type of insurance that protects a homeowners association’s actual money inside of its operating and reserve accounts. It exists so that HOAs can thoroughly protect their finances from possible theft.

When it comes to HOA crime coverage, most standard Crime and Fidelity policies protect the association’s money from the following risks:

• Embezzling
• Check Fraud
• Computer Fraud
• Invoice padding or false invoices
• Wire Fraud

Standard Crime and Fidelity insurance coverage is extended to the following:

• Past board members
• Present board members
• Future board members
• Committee members
• Spouses
• Community or HOA managers
• Accountants and bookkeepers
• Other volunteers

Crime coverage is sometimes referred to as Employee Dishonesty coverage. The Crime coverage protects the insured against theft of money, securities, or other property by an employee or property manager. The program is available for nonprofit habitational community associations including homeowners' associations (HOAs), townhomes, mobile home parks, residential/commercial condominiums (condos), & residential/commercial planned unit developments (PUDs).

Fidelity Bonds provide coverage in a dollar amount for employee dishonesty. Within HOA communities, the board of directors and committee members are sometimes considered non-compensated employees. A Fidelity Bond is an insurance policy which covers the association should a director or the management company steal association funds. Although with current technology it is difficult to do so, there is still the possibility of theft. For a nominal fee, the community can adequately protect itself in the event of such a loss. Please refer to your governing documents to determine the amount of Fidelity Bond coverage that needs to be purchased. And be sure that your management company is included in the coverage.

Other Types of Insurance Coverage Available To HOAs

Other types of coverage include Workers Compensation, Flood, and Difference in Conditions including Earthquake. Employment Benefits and Employment Practices Liability are available for homeowners associations with employees.

Please call us at 714-929-7917 to find out how we can help your HOA community with a personalized coverage plan.