While nearly all homeowners associations operate with some insurance policy, many HOA boards have little to no idea what type of coverage they need or what types would benefit them most. This could lead to confusion, disagreement, and potential litigation if an HOA has allegations brought against it. Claims can cost an HOA financially as well as reputationally. There are certain kinds of insurance an HOA needs, including building and property insurance, general liability insurance, director’s and officers’ insurance, workers’ compensation coverage, and HOA Crime Insurance. But what does HOA crime insurance cover, and why should an HOA obtain it?
Read below for more insight into crime insurance and why an HOA needs to have it.
What is Crime Insurance?
Crime and fidelity insurance for an HOA protects the HOA’s actual money in the operating account and reserve financial accounts. Crime and fidelity insurance protects all that money from crimes like embezzlement, invoice padding, false invoicing, computer fraud, wire fraud, check fraud, and more.
This insurance, which focuses on employee dishonesty, is similar to insurance riders like a Crime Bond. Employee dishonesty and crime bonds both cover the stolen money, but employee dishonesty insurance and bonds will only cover the employees, such as those who steal from the various accounts they handle. Crime insurance covers spouses, committee members, community managers, accountants and bookkeepers, and volunteers.
It’s not uncommon for HOA board members to not know all the moving parts of insurance. In fact, insurance and knowing precisely what an HOA needs is difficult to understand. That’s why it’s essential for experts, like Kevin Davis Insurance, to help put insurance planning in place.
Why Are HOA’s Susceptible to Financial Crimes?
Many HOA’s have large amounts of money sitting in various accounts. HOA’s inside townhome communities or condo communities, more specifically, have money set aside for large capital expenditures. Their capital improvements are planned year over year, focusing on changes in the near future, which means the account may grow large sums of money over time.
Many HOA’s are less active and have fewer people watching the money as it grows, making them an easy target for theft. From submitting false or padded invoices to creating false bank records to using funds a little bit at a time, HOA funds can become challenging targets for someone who puts in a little effort.
How Much Crime Insurance Should an HOA Carry?
An HOA should look up state law first to adequately set its limits. If there is no state law in place, the next place to look is the HOA’s by-laws pr covenants. The governing documents for an HOA usually provides the formula used to determine the amount of coverage the HOA must have on hand at any given moment. Condos will usually want to be Fair Housing Act approved for lending purposes, which requires the community to carry Crime Insurance.
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 (877) 807-8708 to speak with one of our representatives.