FAQs About Excess Liability for HOAs

Homeowners Associations need protections beyond their primary liability insurance. With the right HOA umbrella insurance and excess coverage, your clients have the protection they need for catastrophic events. You can address your clients’ most common questions to help them secure adequate insurance.

What Is Excess Liability Insurance for HOAs?

Unlike primary liability coverage, which only addresses basic claims up to a predetermined limit, your client’s excess policy is a financial safety net when losses exceed that limit. It also differs from commercial umbrella coverage, which encompasses a range of liabilities. Instead, this coverage specifically expands the benefits of the primary policy when a claim exhausts that primary coverage limit.

Why Do HOAs Need Excess Liability Coverage?

HOAs face various risks that can surpass their primary liability coverage, putting them at risk of significant financial losses. Excess coverage offsets the additional costs of a more substantial claim.

Sometimes, contractual obligations may leave HOAs in need of higher liability limits. With excess coverage, they can meet that obligation and protect the HOA from long-term financial harm.

How Does Excess Liability Insurance Interact with Primary Policies?

The interconnection of excess coverage and primary policies helps an HOA ensure comprehensive risk mitigation. When the total loss on a claim exceeds the primary policy’s limit, the excess policy automatically kicks in.

Excess liability insurance differs from policy stacking, where policyholders invest in multiple policies for the same layer of risk with concurrent coverage, such as adding HOA umbrella insurance. Excess coverage is sequential, so it only takes effect when the primary policy reaches its limit. For example, if an HOA faces a liability claim of $1.5 million and the primary liability coverage caps out at $1 million, the excess insurance covers the additional $500,000.

How Is the Cost of Excess Liability Determined?

The cost of excess coverage depends on a variety of underwriting factors. The association’s risk exposure is a key factor, including the risk profile and the association’s claims history. This information helps the insurer evaluate potential future risks based on past liabilities. 

Customization options also factor into the cost. Different coverage limits and deductibles affect the premium, as lower coverage limits or higher deductibles can reduce premium costs.

What Types of Claims Does Excess Liability Insurance Cover?

Excess coverage typically includes losses stemming from bodily injury or property damage claims. It can also cover claims of libel, slander, and some types of personal injury cases. It offers valuable peace of mind in the event of a catastrophic loss; however, it does have limitations. Like many other policies, excess coverage typically excludes intentional acts and contractual liabilities. A comprehensive policy review will help HOA clients understand the scope of their coverage.

When Should an HOA Consider Reviewing or Adjusting Excess Liability Coverage?

An HOA should evaluate coverage regularly to ensure adequate protection for evolving risks. Community changes, including expansion, demographic shifts, and the addition of new amenities, also affect the risk profile. 

Help Your HOA Clients Get the Answers They Need

Adequate liability coverage, including excess and HOA umbrella insurance, plays a key role for your HOA clients. Understanding the facts and reviewing policies regularly can ensure they have the protection they need.

About Kevin Davis Insurance Services

For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (855)-790-7393 to speak with one of our representatives.