7 Common Mistakes HOAs Make When Buying Insurance

Purchasing insurance is a critical responsibility for homeowners associations, as it protects the community's assets and ensures financial stability. The thing is, choosing the right policy can be nuanced and complicated. In the end, many HOAs have made mistakes that can lead to inadequate coverage, higher premiums, or even legal issues.

In this article, I’ll go through seven common mistakes HOAs often make when buying insurance and provide guidance on how to avoid them.

1. Not Understanding the HOA's Insurance Needs

One of the most common mistakes HOAs make is failing to thoroughly assess their insurance needs. Every community is unique, and factors such as property age, location, and amenities can greatly impact the types and amounts of coverage required.

To avoid this mistake, HOAs should work with an experienced insurance agent who specializes in community associations to conduct a comprehensive risk assessment and determine the appropriate coverage.

2. Focusing Solely on Price

While it's important to be mindful of costs, choosing an insurance policy based solely on price can be a costly mistake. Cheaper policies may have significant gaps in coverage or higher deductibles, leaving the HOA vulnerable to financial losses. Instead of focusing exclusively on price, HOAs should prioritize finding a policy that provides adequate coverage at a competitive price.

3. Neglecting to Review and Update Policies Regularly

Insurance needs can change over time, and failing to regularly review and update policies can leave HOAs with outdated or insufficient coverage. HOAs should review their insurance policies annually and make adjustments as needed to account for changes in property values, community demographics, or legal requirements.

4. Not Maintaining Adequate Liability Coverage

Liability claims can be financially devastating for HOAs, making it critical to maintain adequate liability coverage. Many HOAs make the mistake of carrying too little liability insurance, leaving them exposed to potential lawsuits.

To avoid this mistake, HOAs should work with their insurance agent to determine the appropriate level of liability coverage based on their community's specific risks.

5. Overlooking Directors and Officers (D&O) Insurance

Directors and Officers (D&O) insurance is essential for protecting board members from personal liability related to their role in the HOA. However, many HOAs overlook this important coverage, putting their board members at risk. To avoid this mistake, HOAs should ensure that their insurance package includes a comprehensive D&O policy.

6. Failing to Properly Insure Common Areas and Amenities

HOAs are responsible for insuring common areas and amenities, but many make the mistake of underinsuring these assets. This can lead to significant out-of-pocket expenses in the event of damage or destruction. To avoid this mistake, HOAs should work with their insurance agent to ensure that common areas and amenities are properly valued and adequately insured.

7. Not Partnering With a Knowledgeable Insurance Provider

Navigating the complex world of HOA insurance requires expertise and experience. Many HOAs make the mistake of working with insurance providers who lack specialized knowledge of community associations, leading to inadequate coverage or missed opportunities for savings.

To avoid this mistake, HOAs should partner with a reputable insurance provider likeJanover Insurance Group, who has extensive experience working with HOAs and can provide tailored coverage solutions.

Conclusion

Purchasing insurance is a significant responsibility for HOAs, and avoiding common mistakes is essential for ensuring adequate coverage and financial stability. By understanding their insurance needs, prioritizing comprehensive coverage, regularly reviewing policies, maintaining adequate liability and D&O insurance, properly insuring common areas, and partnering with a knowledgeable insurance provider like Janover Insurance Group, HOAs can protect their communities and make informed decisions about their insurance needs.