The Solution for Association Insurance

Property & Liability Insurance

Property and General Liability Insurance form the foundation of a community association’s risk management program. These coverages are essential for protecting the physical assets of the association and safeguarding the community from financial exposure arising from accidents or unforeseen events. Together, they help ensure the long-term financial stability of the association and provide peace of mind to both board members and homeowners.

Property Insurance for Community Associations

Property insurance provides coverage for the association’s common areas and any property the association is required to maintain and insure under its governing documents. Depending on the community, this may include building structures, shared amenities such as clubhouses and pools, and, in some cases, portions of the individual units themselves.

A critical aspect of property insurance is determining the appropriate coverage basis. Associations typically insure their buildings under one of the following methods:

• All-Inclusive (All-In): Covers the building structure as well as many interior components of individual units, such as cabinetry, flooring, fixtures, and built-in improvements. This approach is common in condominium communities and provides the broadest level of protection.
• Original Specifications (Single Entity): Covers the building and the original components installed by the developer but excludes upgrades or improvements made by individual unit owners.
• Bare Walls: Provides coverage only for the building’s structural elements and common components, excluding most interior finishes and fixtures within the units.

Selecting the correct coverage basis is essential to avoid gaps or overlaps in protection. The association’s governing documents should guide this decision, and coordination with unit owners’ HO-6 policies is necessary to ensure comprehensive coverage throughout the community.

In addition to the coverage basis, associations should ensure that policy limits reflect the full replacement cost of the insured property. Periodic insurance appraisals and inflation adjustments are important to maintain adequate limits as construction costs change over time.

General Liability Insurance

General Liability Insurance protects the association from financial losses resulting from claims of bodily injury or property damage occurring in common areas or arising from the association’s operations. This coverage is vital for addressing incidents such as slip-and-fall accidents, injuries at community amenities, or damage caused by association-maintained property.

General liability policies typically cover legal defense costs, settlements, and judgments associated with covered claims. In today’s increasingly litigious environment, this protection is essential for preserving the association’s financial resources and preventing the need for special assessments.

Medical Payments Coverage

Many general liability policies also include Medical Payments coverage, which provides a modest level of protection for minor injuries regardless of fault. This coverage can help pay for immediate medical expenses, such as first aid or emergency treatment, and may reduce the likelihood of more costly liability claims by addressing injuries promptly and amicably.

Key Considerations for Associations

When evaluating Property and Liability Insurance, associations should consider the following factors to ensure comprehensive protection:

• Correct Coverage Basis: Confirm whether the policy is written on an all-inclusive, original specifications, or bare walls basis in accordance with the governing documents.
• Adequate Replacement Cost Limits: Ensure building values are regularly updated through professional appraisals and inflation adjustments.
• Deductible Structure: Understand how deductibles are allocated and whether an insurance resolution clarifies owner responsibilities.
• Coordination with HO-6 Policies: Communicate coverage responsibilities to unit owners to prevent gaps or overlaps.
• Liability Limits: Select limits that reflect the size, amenities, and exposure of the community.
• Additional Insureds: Verify that property managers, vendors, or other parties are included when required by contract.

Supporting Financial Stability and Risk Management

Property and General Liability Insurance are essential for protecting the association’s physical assets and financial well-being. By ensuring that buildings are insured correctly and that liability exposures are adequately addressed, associations can better withstand unexpected events and maintain a stable financial environment for their members. Working with an experienced insurance professional helps tailor coverage to the specific needs and risks of the community.