Homeowners associations play important roles in their communities, such as organizing events and enforcing property-related rules. However, their position makes them vulnerable to liability, property damage, and even personal injury lawsuits. Directors may also face liability if their decisions contribute to harm. As an agent, you can help these organizations stay protected with HOA umbrella insurance.
What Is HOA Umbrella Insurance?
Insurance policies have coverage limits to minimize the insurer’s risk. However, organizations often need more coverage for full protection. Luckily, they can obtain additional policies specifically designed to resolve this issue.
Umbrella insurance fills in these gaps. For example, umbrella insurance can provide supplemental coverage to a directors and officers policy, protecting HOA board members’ personal assets.
Excess liability insurance plays a similar role but only extends liability coverage. In contrast, umbrella insurance provides expanded protection for several policies under the “umbrella.”
What Risks Do HOAs Face?
Homeowners associations face several risks:
- Event-related hazards such as food poisoning and negligence in vetting vendors
- Actions of community security guards
- Extreme weather impacting common areas such as playgrounds and clubhouses
- Personal injuries from lakes and pools
As the agent, you should work with HOA directors on a risk assessment. Doing so identifies top concerns, allowing you to recommend tailored HOA umbrella insurance for the organization’s needs.
Risks vary depending on the type of community the HOA serves. For example, the HOA may be responsible for clearing roads and sidewalks of ice and snow if the neighborhood is in the suburbs. Should the hired services do a poor job, resulting in slipping and falling, the injured party may sue the HOA for choosing a subpar vendor.
Alternatively, if the HOA functions in a condominium community, the organization may be responsible for maintaining residential buildings. Issues stemming from negligence, such as mold and fire hazards, may be grounds for suing. With single-family homes, homeowners typically must tend to their own dwellings, eliminating this risk.
How Do Compliance and Legal Considerations Factor In?
Many states require HOAs to have property and general liability insurance. Each state has different regulations governing how much coverage HOAs need, so these organizations must work closely with agents to stay compliant.
Without proper HOA umbrella insurance, individual members may have to foot the bill for the fallout:
- Property repairs
- Equipment replacement
- Court costs of fighting a liability lawsuit
Each HOA may also have rules stating which properties the association must insure, known as conditions, covenants, and restrictions (CC&Rs). These governing documents clarify the HOA’s responsibilities and are legally binding, compelling the HOA to follow them just like members of the neighborhood.
How Can You Communicate the Need for HOA Umbrella Insurance?
While HOA umbrella insurance is essential for protecting the organization, members may not always understand why. To some, it may look like an unnecessary expense complicating HOA financial management.
As a result, agents should prioritize insurance education. Policy renewal is a good time to broach the subject, as the association must reevaluate its needs anyway. It’s also a good idea to keep a line of communication open through emails and mailers to remind members that you’re available to answer questions and adjust coverage.
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.