When you're responsible for governing a homeowner’s association (HOA), one of the most important duties you carry is protecting the association from risk. While many boards focus on daily operations such as maintenance, meetings, and budgets, insurance can sometimes feel like a background item that only surfaces when something goes wrong.
But here’s the truth:
Your association’s insurance program is one of its most powerful tools for financial stability, risk reduction, and long-term resilience. Ensuring you have the right policies in place (not just the required ones) can make all the difference during an unexpected event.
Understanding Your Community’s Real Risk Exposure
Every association faces unique risks based on its location, structure, amenities, and governing documents. Yet many boards underestimate how quickly a single claim can become financially overwhelming.
Key questions your board should regularly revisit include:
- What property do we actually own or have responsibility for?
Roofs? Siding? Shared structures? Amenities? Each affects the type and amount of insurance required and the association’s eligibility for premium discounts. - Does our policy reflect current property values?
Reconstruction costs fluctuate, and outdated valuations can leave your community dangerously underinsured. - Are we covered for today’s risks?
Cyber incidents, extreme weather, volunteer board decisions, vendor mistakes—modern exposures require modern coverage.
By looking at risk more holistically, your board can make informed, proactive decisions instead of reacting to crises later.
Core Policies Every Association Should Evaluate Carefully
While needs vary by community, most associations should regularly review and confirm the adequacy of the following coverage types:
Property Insurance ensures your buildings and common areas can be repaired or rebuilt after damage from storms, fires, vandalism, or other covered losses.
Check for:
- Up-to-date replacement cost valuations
- Adequate coverage for all shared elements
- Appropriate deductibles based on risk tolerance and budget
General Liability Insurance covers bodily injury or property damage claims involving common areas. A single slip-and-fall or amenity-related incident can lead to substantial costs.
Directors & Officers (D&O) Insurance protects volunteer board or committee members when they are named in lawsuits related to governance decisions. With increasing litigation in HOA environments, this coverage is more important than ever.
Crime/Fidelity Coverage safeguards association funds in the event of theft or embezzlement by employees, volunteers, or vendors, or if mail fraud occurs.
Cyber Liability Insurance is an essential modern protection that covers private data breaches, electronic fraud, and other technology-related losses.
Workers’ Compensation may be required even if the association has no direct employees - many states expect boards to maintain coverage for volunteers or certain contractor situations.
Discuss optional additional coverages with your insurance expert, which will vary greatly depending on the risks being underwritten. Wind, hail, flood, ordinance or law coverage, excess umbrella liability, coinsurance, etc., all sound like a lot to contemplate; however, having the right coverage in place is a game-changer when disaster strikes.
How to Build an Effective Insurance Strategy
A comprehensive insurance strategy requires ongoing planning and regular review, making it essential to incorporate these steps into your board’s annual risk management process.
- Schedule a yearly coverage review with an experienced insurance professional who understands HOA-specific exposures.
- Compare policy terms and limits, not just premiums. The lowest price rarely reflects the best protection.
- Understand the difference between a stand-alone policy and an endorsement for coverage, and be sure to understand specific exclusions from coverage fully.
- Review your governing documents to understand insurance obligations and the owners' responsibilities.
- Choose reputable carriers with experience in the HOA market and a solid record of claim processing.
- Updating valuations and reserve studies ensures your coverage matches today’s costs, preventing underinsurance and supporting long-term financial planning.
- Ensure alignment between your insurance program and your maintenance practices. Deferred maintenance can lead to denied claims.
- Educate new board members about the association’s insurance structure so governance decisions reflect informed risk awareness.
Why Adequate Coverage Protects More Than Property
Comprehensive insurance does more than repair roofs or manage liability; it safeguards the financial health of your entire community. Underinsurance can lead to:
- Unexpected special assessments
- Delays in rebuilding after major damage
- Personal financial exposure for board members
- Legal disputes among owners
- Loss of property value and buyer confidence
A well-structured policy, on the other hand, strengthens stability, supports compliance with lending guidelines, and ensures that homeowners aren’t stuck paying the price for preventable gaps.
Partnering With Experts Makes a Difference
Insurance for community associations is complex, and policy language isn’t always easy to interpret. Working with knowledgeable professionals such as your community manager, reserve analyst, and insurance advisors helps ensure your community is fully protected and compliance-ready.
They can guide you in:
- Understanding evolving risks
- Ensuring coverage aligns with governing documents
- Evaluating options that balance cost with protection
- Keeping the board informed and confident in its decisions
Final Thoughts
Insurance is more than a line item in your budget. It's part of the foundation that keeps your community strong, solvent, and prepared for the unexpected. By taking a proactive, big-picture approach to risk management, your board can protect homeowners, reduce financial uncertainty, and support the long-term success of your association.
About Community Association Management Services
In business since 1991, CAMS has grown to become North and South Carolina’s premier community management company. With experienced local managers in each of its nine regions, CAMS provides innovative solutions to the community associations it serves. To learn more, visit www.camsmgt.com/choose-cams.
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