A reliable homeowners’ association board must assess the exposure of their community to insurance risks. These risks must be included in the HOA’s next update. Identifying some of these risks can be easy. But there are uncommon risks that must be paid attention to. If your board of directors is not confident about insurance risk identification and management, it should get help.

Insurance is your HOA’s safeguard against unexpected issues. It protects the financial stability of your association by offering support during a crisis. But not all HOAs know the risks to cover. Below are insurance risks that your next insurance update must include:

General Liability

HOAs must buy general and commercial liability insurance. Such insurance protects your association when losses due to third parties occur. It is particularly necessary if such losses result in injury or property damage. Your HOA can turn to its liability insurance for coverage when it has to pay financial damages and cover legal fees. 

Property Damage

Although residents must carry individual property insurance, the association must insure common areas and facilities in the community. When buying HOA property insurance, the board must ensure it covers the most perils. These include hail, high wind speed, earthquakes, and wildfires. HOA boards should get important insurance add-ons.

Personal Issues

A lot of HOAs employ personnel or employees, exposing the association to loss or liability. This is why your HOA must have proper workers’ compensation and fidelity insurance for both theft and fraud. 

Your HOA may not have workers, but it has board members. As the board runs an association, members are exposed to risks and liabilities. They can be sued by residents personally. To make sure the board is properly protected, the association must have adequate directors’ and officers’ insurance. 

Income Risks

Associations can face financial losses because of reduced revenue or increased costs. Also, these losses can take place because of poor fraud or poor fund management. Thus, it is a good idea for your board to buy insurance for income risks. 

A lot of HOA communities are underinsured due to financial strain. Board members would choose to spend huge sums of money on policies that may not come into play. However, this can pose a threat to communities. 

Insurance costs continue to increase as risks become realities. Insurance providers base their premiums and projections on discoveries, not historical data. While HOA insurance may be costly now, running an HOA without it can be costlier in the long run.