The Four Policies You Need

Homeowner associations (HOAs) play a crucial role in managing the 28.2 million housing units in the U.S. From maintaining shared spaces to enforcing community rules, as an officer or board member with an HOA, your responsibilities come with unique risks that require proper insurance coverage. Without the right policies, HOAs like yours could face financial burdens from lawsuits, property damage, or even fraudulent activities.

The homeowner association typically purchases insurance to cover the exposure of the association. The association’s declarations and bylaws will spell out who is responsible for insuring what. This coverage is essential for any managed community, whether it consists of townhomes or detached houses. However, it does not cover individual homeowner’s personal property—those remain the homeowners’ responsibility through their personal insurance policies. The association declarations and bylaws include the party responsible for insuring the home’s exterior portions.

In this article, John Carroll—commercial staff underwriter at Central Insurance—explains why HOA insurance is essential for these organizations, what policies are most critical, and how associations can protect themselves from potential liabilities.

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Four Key Insurance Coverages Every Homeowner Association Needs

Homeowner association insurance differs significantly from individual homeowner insurance, as it is designed to protect a community’s shared spaces and financial interests as specified in the association declarations and bylaws. 

Here, Carroll outlines the policies that are most critical for an HOA:

1. General Liability Insurance: Protection Against HOA Lawsuits

General liability insurance is the foundation of any homeowner association insurance plan, as all have some liability exposure due to your land ownership or management. It can protect against lawsuits alleging bodily injury or property damage occurring on HOA-managed property.

“Some of the biggest risks that an HOA faces are liability related to exposures such as swimming pools, lakes, playgrounds, and walking surfaces,” Carroll explains. “For example, a resident could slip and fall on an HOA-maintained walking path and sue for medical expenses. Perhaps a child is injured on the community playground equipment after a pothole on an HOA-managed road damages a swing breaks or a vehicle. In these scenarios, the HOA becomes at risk for a lawsuit.”

Keep In Mind: For HOAs with high-risk amenities like swimming pools, lakes, or ponds, an umbrella policy provides additional liability coverage beyond standard general liability limits. It’s important to note that your local insurance agent is the best resource for finding the optimal coverage level to meet your needs.

 2. Homeowner Association Insurance: Coverage for Shared Spaces & Structures

If your HOA owns physical structures or common areas, commercial property insurance is essential to protect against losses due to fire, lightning, vandalism, wind damage, and other perils.

“Property insurance provides protection for property such as a clubhouse, playground equipment, swimming pool, fences, entrance signs, and storage buildings,” Carroll says. “Since much of your HOA-owned property is outdoors, wind and weather-related damages are common claims. Ensuring the right coverage limits is crucial for rebuilding or repairing these damaged structures.”

For Additional Protection: Carroll also highlights that most standard (or base) commercial property insurance policies don’t cover losses involving money, securities, and employee theft. These exclusions can create a critical gap for HOAs, which handle resident dues, fees, and other financial transactions, making them vulnerable to financial theft and fraud.

Commercial crime insurance is a commercial property endorsement that can provide essential protection against embezzlement, fraud, and stolen funds. For example, if cash collected for HOA fees is stolen from an office safe, crime and fidelity insurance may help cover the loss. Along with crime coverage, HOAs should consider purchasing Cyber insurance to protect their financial interest from cyber attacks.

 3. Directors & Officers (D&O) Insurance: Safeguard HOA Board Members

HOA board members make critical decisions on behalf of the community, but those decisions can sometimes lead to legal disputes. You may not be familiar with directors and officers (D&O) insurance, but it helps protect your HOA board members, directors, and officers from lawsuits related to their decisions. For example, a homeowner might sue the HOA for enforcing a fine they believe is unfair. Without D&O insurance, board members could be personally liable for legal fees and damages.

Learn more: How to Get Business Insurance

 4. Workers’ Compensation Insurance Covers Volunteers

Even if an HOA does not have paid employees, volunteers may be considered employees under some state laws. If the volunteers are exempted from the state workers’ compensation law, the HOA may want to provide coverage through a workers’ compensation policy by including the Voluntary Compensation and Employers Liability Coverage endorsement on the policy.  Workers’ Compensation provides coverage if a volunteer or worker is injured while performing HOA duties. For example, a volunteer could fall while setting up for an HOA event and suffer an injury. Without proper coverage, your HOA could be liable for medical expenses and lost wages.

Did You Know? There are millions of volunteers in the U.S. that serve on homeowner
association boards and committees.

Best Practices for Ensuring Adequate Homeowner Association Insurance Coverage

“The best way for your HOA to protect itself is by taking a proactive approach to risk management,” Carroll says. “Regular property inspections help identify hazards in walking trails, playgrounds, and pool areas before they become costly issues.”

He goes on to explain that enforcing safety rules—such as pool safety policies, parking regulations, and event guidelines—can also reduce liability risks. 

If third party vendors are used for such activities as lifeguards or lawn and tree maintenance, there should be written contracts. These contracts should verify that the vendor has general liability insurance, which shows your association as additional insured. The association should obtain certificates of insurance annually from all vendors.

Carroll also stresses that working with an experienced independent insurance agent will ensure your HOA selects the right coverage limits while investing in loss control can provide valuable safety recommendations from insurers.

Choose Central for Homeowner Association Insurance

Homeowner association insurance is not just a legal necessity—it’s a financial safeguard that protects your community, board members, and assets. By choosing the right coverage and working with a trusted insurance provider like Central, HOAs can manage risks effectively and provide residents with a safe, well-maintained living environment.

With decades of experience in the insurance industry, Central understands the unique risks HOAs face. As a service-oriented company, we offer customized coverage plans, strong financial stability, risk management assessments, and responsive claims handling and customer support.

Reach out to your Central agent today to learn more about homeowner association insurance and start a customized quote.