Much like businesses, homeowners associations (HOA) need insurance policies to protect against litigation. Without proper coverage, property owners and managers are at risk for costly legal proceedings between third parties and tenants. After all, maintaining and managing a safe, sound, and secure community should be the priority, which becomes hard to do if embroiled with legal proceedings.
HOAs are exposed to a variety of risks because the HOA often acts as a liaison between residents, employees, and vendors. In doing so, the HOA can get caught in the middle of things, leading to lawsuits — warranted or not. In order to protect from the various claims that are common for HOAs, here are a few types of HOA insurance policies to consider:
- Tenant Discrimination Insurance – Under the Fair Housing Act, buyers and renters are protected against religious, age, disability, racial and/or sexual discrimination, or harassment by sellers or landlords. If an HOA is sued by current, former, or prospective tenants in violation of the Fair Housing Act, tenant discrimination insurance will protect property management companies from the resulting expenses.
- Directors & Officers Liability Insurance – Directors and officers liability insurance (D&O) is a type of liability insurance that covers directors and officers from claims made against them while serving on a board of directors and/or as an officer. These claims are often a result of decisions made by the directors or officers that caused negative financial consequences for tenants or other third-parties.
- Builders Risk Insurance – An essential part of any residential construction project is a builders risk insurance policy. Builders risk insurance is a form of property insurance that is specific to buildings under construction and covers things like structures, building materials, and lost income due to construction delays.
- HOA Umbrella Insurance – In addition to the more specialized forms of insurance, an HOA umbrella insurance policy is one of the best ways to ensure the most coverage for an HOA. Communities with high risk or high liability areas like pools or playgrounds should especially consider adding an umbrella policy.
HOA insurance policies are good for both the HOA and the tenant because the policy often covers damage to common areas, shared features, and amenities. Homeowners and tenants rely on the HOA to protect their interests. Given the exploding Denver housing market, Denver HOAs should definitely make sure their coverage is up to date by speaking with a Colorado insurance broker.