When someone purchases a home within an HOA community, they automatically become a member of the association. A homeowners association is an organization that enforces rules and policies within a subdivision. They also provide services to their residents and help establish a strong community culture within the neighborhood. This may include hosting social events on the common grounds which are also managed by the homeowners association.
Homeowners association insurance is an insurance policy that an HOA purchase to mitigate their financial risk related to property damage and liability claims. This is often referred to as a Master Policy.
The cost of HOA insurance will depend largely on what the policy includes which should be personalized according to the specific needs and preferences of the association. The two primary aspects of this policy are liability coverage and coverage for property damage. In some cases, additional coverages may apply, such as Directors & Officers insurance, social host liability insurance, discrimination claims insurance and garage keeper insurance. The following is a more detailed review of the two primary coverages.
Liability insurance protects the homeowners association from legal costs associated with claims of liability. For example, if the guest of a resident injures themself while using the neighborhood tennis court and makes a claim against the HOA, the liability insurance coverage covers the attorney fees, settlement payments and other costs legally associated with the claim. In the absence of an insurance policy, the HOA would be directly responsible for the costs associated with the claim.
Property damage insurance protects the HOA against the costs associated with damages to the common ground structures of the neighborhood. This may include a clubhouse, tennis court, gym, etc. For example, if the roof of the community clubhouse was damaged by a heavy thunderstorm, the HOA insurance would provide coverage for the cost to repair or replace the roof (up to the policy limits of the HOA insurance).
It does not provide protection to the home or property of the individual homeowners; these structures should be covered by the individual homeowner’s insurance policy for their property.
An HOA insurance policy is purchased by the association and is specifically for the protection of the association. It also provides protection to the board members only as they serve in their capacity on the HOA board. It does not provide individual protection to board members in any situation outside of their service on the board. It provides coverage for the HOA from the costs associated with liability claims and property damage that occurs on the common grounds of the association (i.e. playgrounds, community pools, gyms, etc.).
Homeowner’s insurance is purchased by the owner of the home. The insurance policy of each individual homeowner provides coverage for issues such as damage and theft of the personal property of the homeowner. It also protects the homeowner from claims of liability related to their personal property.
Although chosen and purchased by the HOA board, HOA insurance is indirectly paid by the community members out of the HOA fees or dues that each homeowner pays on a monthly, quarterly or annual basis. HOA fees are collected to cover a variety of expenses which are specific to each HOA.
Some associations include amenities such as a pool or gymnasium which can create additional expenses, whereas other associations may only include trash removal and lawn maintenance. Because every HOA is unique in amenities, there is no standard policy price but the average HOA insurance policy may cost between $50 and $100 per month (or up to $1,200 per year if paid annually).
If your HOA is ready to renew an existing policy, or is unsure what specific coverage may be required to start a new policy, contact the experienced team at Pro Insurance Group. We take genuine pride in assisting our clients and look forward to working with your association to help mitigate the financial risks for your HOA.