What Every HOA Board Should Know About Its Insurance Program
If you're serving on the board of your homeowners' association, you're wearing a lot of hats, and "insurance expert" probably isn't one of them. That's okay. Most HOA board members are volunteers, not risk managers. But insurance is one of the most critical responsibilities you oversee. A poorly structured insurance program can expose your entire community to financial risk while putting board members at odds with their neighbors.
Here's what every HOA board should understand about their insurance coverage and how to ensure their program is doing what it's supposed to.
1. Your Governing Documents Drive Your Coverage Obligations
The most important document in your insurance program isn't your policy; it's your CC&Rs (Covenants, Conditions, and Restrictions). Your CC&Rs define what the association is legally responsible for insuring, and what's left to the individual unit owners.
Your commercial property carrier and each unit owner’s HO6 policy will both defer to the language in this document when determining who pays for what after a loss.
Key takeaway:
If your insurance policy doesn't align with your CC&Rs, your association could be paying claims it shouldn't, or worse, denying claims it should cover.
Are you confident that your HOA's insurance program is fully aligned with your governing documents and protects your board effectively? If you're unsure, it's time to take a closer look!
2. The Right Coverage Isn’t Always the Cheapest
It's tempting to choose the lowest premium, especially when budgets are tight. But HOA insurance isn't just about price. Working with a highly experienced HOA-insurance broker will enable boards to adopt unique coverage strategies that will reduce premium. However, boards need to think like fiduciaries because that's what the role entails. Board members are managing multimillion-dollar nonprofit corporations, which require a business mindset.
One common example: Intentionally undervaluing the replacement cost value of the community to maintain inadequate coverage limits at a lower cost. This may save money but could compromise the association’s ability to rebuild to pre-loss condition following a notable fire loss.
Key takeaway:
A strong insurance program protects the entire community, not just the balance sheet.
3. HO6 Policies Matter, Even if You're Not the One Buying Them
Your insurance broker should be able to clearly explain how individual HO6 policies interact with the association’s master policy. Many boards (and owners) misunderstand where one policy stops and the other begins. That confusion can lead to claim disputes, delays, and finger-pointing after a loss.
Some states allow you to adjust your governing documents to better align with how coverage actually works in practice. Others don't. Your broker should help you navigate both your legal obligations and your practical options.
Key takeaway:
Educating your homeowners on their role in coverage helps reduce friction and risk for everyone.
4. Who You Buy From Matters
It's not just about the coverage you have, but also who helps you manage it. Community associations function very differently from standard commercial properties. You need a broker who understands:
- Volunteer-led boards and how they make decisions
- The role of third-party community managers
- Unique risks like shared property, common elements, and governance disputes
- Legislative requirements and lender compliance
A good broker does more than place coverage. They'll help you interpret your governing documents, assist with claim advocacy, and offer proactive guidance on risk management strategies so you can avoid surprises at renewal time.
Key takeaway:
Work with an insurance partner who specializes in community associations.
5. Consistent Service Builds Stronger Communities
One of the most overlooked parts of an HOA insurance program is the service model behind it. When losses happen, having a clear claims process in place can make a big difference. The same goes for issuing certificates, answering homeowner questions, and working with your property manager.
At AssuredPartners, we build service models that are tailored to the unique needs of community associations. That includes everything from CC&R reviews and HO6 education to ongoing support for your community manager and board.
Key takeaway:
Insurance is more than a product. It's a service that should make your job easier.
Let’s Talk About Your Program
If you're unsure whether your current insurance program aligns with your governing documents or fully protects your board, it may be time for a fresh look. Our HOA insurance specialists focus exclusively on community associations, and we'd be happy to help.
Contact us today to schedule a policy review or learn more about how we support boards and managers just like yours.
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