What is Insurance Coverage?
Insurance coverage is a contract (policy) in which an insurer indemnifies the insured against losses from specific contingencies or perils. Essentially, it is a means of protection against potential financial loss. In a homeowners association, insurance coverage typically encompasses a range of policies including property, liability, and directors and officers (D&O) insurance.
Property Insurance
Property insurance for HOAs covers damage to common areas and shared structures, such as clubhouses, swimming pools, and sidewalks. This policy covers damages resulting from various events like fire, storm, theft, and vandalism.
Liability Insurance
Liability insurance is critical for HOAs as it covers legal costs and payouts if the HOA is sued for injury or property damage occurring in common areas. For example, if a resident slips on an icy sidewalk within the HOA’s jurisdiction, liability insurance would cover the costs.
Directors and Officers (D&O) Insurance
D&O insurance protects board members against legal actions stemming from their decisions as HOA representatives. If a resident sues the HOA board for mismanagement, D&O insurance would cover the legal fees and any settlements.
It is crucial for HOAs to work with an experienced insurance agent to ensure they have adequate coverage. The ideal insurance coverage should align with the HOA’s bylaws, CC&Rs, and state laws, providing a comprehensive shield against potential financial risks.
