D&O insurance for HOA boards is an important liability insurance that is payable to the directors, officers and the community association. These policies pay out in the case of legal action against them, and D&O liability insurance is a way to protect them from personal losses. It’s one of the primary ways a HOA board can protect itself and those on the association board. Since this form of liability insurance usually pays out to the directors and officers, policies like these are commonly known as a D&O.
Some associations make the mistake of not investing in this type of insurance, thinking that their close-knit community and board is like family. It’s very risky to continue acting as though they will never face legal problems, and the consequences can be disastrous for all those involved.
Home associations should always be prepare for legal situations should they occur, and D&O insurance for HOA gives them a way to mitigate their risks.
Benefits of D&O Insurance for Board Members
In this day and age, being a part of an association board comes with more and more risks. Lawsuits have become commonplace. The range and scope of claims that could be made against a community association are ever varying and continually increasing in number. Therefore, acquiring a secure and comprehensive insurance is a smart way to protect your association and board members. That’s where the right D&O insurance for HOA comes in.
Not only that, but a good set of directors and officers insurance also opens up opportunities for the association to give attract and retain high-quality board members. These members, who might otherwise consider their position a liability to themselves and their family, will have peace of mind with a comprehensive D&O insurance for HOA.
It is crucial for your association to be smart and put in your research when deciding to invest in D&O coverage. We have put together a list of tips to follow when selecting a policy.
Pay Your Dues
As with any type of insurance, it is crucial to not be stingy when it comes to selecting a reliable policy. There are a lot of companies and policies looking to take advantage of companies. These types of policies promise the world but deliver very little. Therefore, it is prudent to be cautious of policies that seem a little too good to be true. For an association board, anything with less than a $700 annual premium is likely to having gaping holes in the coverage.
Don’t Trust Name Alone
Many people have been trained to trust certain big names in the business of insurance, or have found that a certain company has served them well in other areas over the years. However, when it comes to D&O coverage, big names in insurance don’t always deliver. Oftentimes, D&O can be one of the weakest branches of an otherwise strong company. It is therefore important to research beyond the name into what they actually offer, and whether the coverage will be adequate for the individual situation of the association.
Consider Who is Covered
Many cheap policies will be very exclusive about who they cover within the association. When looking for a good policy, it is important for you to think beyond just the board. Excellent D&O policies won’t just protect the members of the board, but also their spouses, volunteers, managers, and directors. Think big when it comes to those covered, and find a D&O that covers everyone that you think could be at risk from any possible claims.
Know the Unique Needs of Your Business
The risks and needs of an association board are different from those of other businesses. When selecting a D&O, it is helpful to consider the unique situations that a HOA board face from time to time. Your agent for your D&O should have a thorough understanding of all extraneous documents and circumstances relating to the association such as covenant paperwork, government documents, and CC&Rs. You should also consider common claims when choosing your protection.
Consider all of the most common issues, such as dispute on community restrictions and claims relating to the association’s failure to comply with by-laws. It is important to look at the history of your association as well to better understand what the board needs from a D&O insurance for board members.
Focus on Both Non-Monetary and Monetary Claims
Many D&Os insurance for HOA only provide protection for monetary claims. This would only cover any claim that someone makes in an attempt to get monetary restitution. However, a large portion, if not a majority, of claims that associations face are non-monetary in nature. These may include claims such as architectural controls and restrictions, and circumstances involving the appointment or removal of members of the association board. Since no one likes to hear the words “we don’t cover that,” it is always wise to make sure the policy that you select covers both.
Be Selective About Limits
It is important to carefully consider the pros and cons of policy limits. For instance, some plans have larger limits and cheaper deductibles, but have a very small amount of things that are covered on the policy. Another policy may have a smaller limit and a larger deductible, but provide very secure and far-reaching protection. Limits and deductibles vary largely based on company size, so it is crucial to consider your specific situation and purchase a policy that best serves your needs.
Buy the D&O insurance for HOA Extras
Most D&O insurance for HOA offer extras that you can boost your coverage. These will cost you a little more per year, but are worth the extra cost in the long run. These extra benefits can include coverage beyond your current limit, and insurance that will cover any court costs that may occur because of a claim. Many policies may also include various other add-ons that will protect members from claims of harassment, discrimination, or failure to fulfill a contract.
Having these additions can really boost your protection for a relatively small price. If you can find a high quality D&O insurance for HOA that adds some of these benefits as part of the original policy, so much the better.
Having a high quality D&O is one of the best moves a director of a board can make when establishing an effective team. These protections can be an enormous incentive for board members to join your team. Don’t make the mistake that so many others have made and neglect acquiring this type of coverage for your association. Even in an environment of hard workers, and calm dispositions, anything can happen and you should be protected when it does!