Protecting Your Community: A Comprehensive Guide to HOA Insurance

At Rollo Insurance, we value what you value. We value your family, your home, and your community. Your home may happen to be in an HOA, so it’s important to know that your community that your hard-owned home resides in is protected. Homeowners Associations (HOAs) play a vital role in maintaining and enhancing the quality of life within planned communities. From managing common areas to enforcing community guidelines, HOAs shoulder significant responsibilities. To safeguard the association’s assets and protect its members, comprehensive HOA insurance is essential. At Rollo Insurance, we understand the unique needs of Texas HOAs and are here to guide you through the complexities of coverage.

What Types of Associations/Real Estate Developments Need HOA Insurance?

HOA insurance is designed for a variety of planned communities and real estate developments, including:

• Single-Family Home Communities: Associations governing neighborhoods of detached houses with shared amenities like parks, pools, or community centers.
• Condominium Associations: Associations managing the common elements of a condominium complex, such as hallways, roofs, and shared recreational facilities.
• Townhome Associations: Similar to condo associations, these govern communities of attached dwellings, often covering shared walls, roofs, and common areas.
• Cooperative Housing Associations: Associations where residents own shares in a corporation that owns the property, rather than owning their individual units directly.
• Planned Unit Developments (PUDs): Master-planned communities that may include a mix of housing types (single-family homes, townhomes, condos) and extensive common areas.

Essentially, any community with shared ownership and collective responsibility for common areas and their upkeep typically requires HOA insurance.

Opening the Door: Understanding the HOA Master Insurance Policy

The cornerstone of an HOA’s insurance protection is the master insurance policy. This policy is purchased by the HOA and covers the common elements of the community. The specific coverage details can vary depending on the type of association and its unique characteristics, but typically include:

• Property Insurance: Covering damage to common buildings (clubhouses, gyms), shared structures (pools, fences, gates), landscaping, and other association-owned property. This coverage can be for actual cash value or replacement cost.
• General Liability Insurance: Protecting the HOA against claims of bodily injury or property damage occurring in common areas. This could include a slip-and-fall by the pool or damage caused by falling tree limbs in a common area.
• Directors & Officers (D&O) Liability Insurance: Providing protection for the HOA board members against claims alleging wrongful acts, errors, omissions, or breach of duty in their capacity as board members.
• Crime Insurance (Fidelity Coverage): Protecting the HOA against financial losses resulting from dishonest acts by board members, employees, or the management company, such as embezzlement.
• Equipment Breakdown Coverage: Covering the cost to repair or replace essential shared equipment that breaks down due to mechanical or electrical failure (e.g., pool pumps, HVAC systems for common buildings).
• Hired & Non-Owned Auto Liability: Providing coverage if someone acting on behalf of the HOA (e.g., a board member running errands) causes an accident in their personal vehicle.

HO3 vs. HO6 Insurance: What’s the Difference for Individual Homeowners?

It’s important to distinguish the HOA’s master policy from the insurance policies individual homeowners within the association need. Two common types of homeowners insurance policies are:

• HO3 (Homeowners Policy – Special Form): This is the most common type of homeowners insurance for owners of single-family homes. It provides “all-risk” coverage on the dwelling itself (meaning it covers all perils except those specifically excluded) and named-perils coverage on personal property.
• HO6 (Condominium/Co-op Policy Form): This policy is specifically designed for owners of condo or co-op units. It typically covers the interior of the unit (walls, floors, fixtures), personal property, and liability arising from the unit owner’s actions. The master policy covers the building’s common elements.

Insurance for HOA Board Members: Directors & Officers (D&O) Liability

Serving on an HOA board is a volunteer role with significant responsibilities. To protect board members from potential personal liability arising from their decisions and actions, Directors & Officers (D&O) Liability insurance is crucial. This coverage can help pay for legal defense costs, settlements, and judgments resulting from claims of:

• Breach of fiduciary duty: Allegations that board members didn’t act in the best interests of the association.
• Mismanagement of funds: Claims of improper handling of association finances.
• Discrimination: Allegations of unfair treatment of homeowners.
• Failure to enforce covenants: Claims that the board did not properly uphold community rules.
• Errors and omissions: Mistakes made in good faith while carrying out board duties.

HOA Requiring Proof of Homeowners Insurance from Members

While not part of the HOA’s master insurance policy, it is very common and generally advisable for HOAs to require individual homeowners to maintain their own homeowners insurance. This is typically stipulated in the HOA’s governing documents (bylaws, covenants, conditions, and restrictions – CC&Rs).

Requiring proof of homeowners insurance protects the individual homeowner’s personal property and provides liability coverage within their own unit. It also helps prevent the HOA’s master policy from being burdened with claims that are the responsibility of the individual homeowner. In summary, while the HOA’s insurance focuses on common elements, the homeowner’s insurance protects their personal space and belongings.

What Does an HOA Policy Cover?

An HOA master insurance policy typically covers:

• Damage to common buildings and structures: Clubhouses, pools, fences, roofs of shared buildings
• Damage to common area landscaping and personal property owned by the HOA
• Liability for injuries or property damage occurring in common areas
• Liability protection for the HOA board members in their official capacity
• Financial losses due to dishonest acts by those handling HOA funds
• Breakdown of shared essential equipment

What’s not under the roof of an HOA policy? 

An HOA master insurance policy generally does not cover:

• The interior of individual homeowners’ units: This is the responsibility of the individual homeowner’s insurance policy (HO6 for condos/townhomes, HO3 for single-family homes).
• Personal property of individual homeowners: Furniture, clothing, electronics within individual units are covered by the homeowner’s own policy.
• Liability arising from incidents within an individual homeowner’s unit: If a guest is injured inside a homeowner’s condo, the homeowner’s personal liability coverage would typically apply.
• Damage resulting from lack of maintenance by individual homeowners within their own units.
• Certain natural disasters like floods or earthquakes: These often require separate specialized policies.

Feel at Home with Rollo Insurance

Rollo Insurance believes in the value of community and feeling at home. HOAs echo this sentiment in providing a supportive environment for homeowners to thrive and have protected time with their families. Navigating the insurance needs of an HOA can be complex, but having the right coverage is crucial for the financial well-being of your community and the protection of its board members. At Rollo Insurance, we have the expertise to help Texas HOAs understand their risks and secure comprehensive insurance solutions tailored to their specific needs. Contact us today for a consultation, and let us help you build a strong foundation of protection for your association.