Almost all HOAs have certain types of policies that they enforce on their books. Unfortunately, too many HOA boards do not know of or have too little of the right type of insurance that is necessary for their association. Example of this is Crime and Fidelity Insurance. When they don’t have the proper insurance on the books, various litigations and claims can end up costing them thousands or even millions of dollars in the long run.
A homeowners association should always have certain types of insurance. These should include: general liability insurance, building/property insurance, workers compensation coverage, director’s and officer’s insurance, and fidelity insurance.
This particular article will clarify what crime and fidelity insurance is so that your HOA management company understands exactly what type of insurance is crucial to have.
1.) Understanding Crime and Fidelity Insurance
Your homeowner’s association will have money in their operations and reserve account. Crime and Fidelity Insurance is what is needed to protect this money. This kind of insurance will protect the money in the accounts against crimes such as embezzling, false invoices, invoice padding, check fraud, wire fraud and computer fraud.
2.) Knowing the Difference- Crime and Fidelity and Employee Dishonesty
The main difference between the two is who is being covered. Employee Dishonesty is comparable to a Crime Bond. Each will cover any money that is stolen, but most Employee Dishonest insurance coverage and bonds only cover the employees. This includes the board members of a non-profit HOA.
Crime and Fidelity Insurance will cover the following people:
•All past, present and future board members
If an employee is the one to steal money from the association, Employee Dishonesty Insurance and Bonds will typically be the one to cover the loss. Crime and Fidelity Insurance covers four other types of theft from the HOA association. These are Check Fraud, Computer Fraud, Wire Fraud and the actual taking of the money. It is also important to include third-party crimes. This covers an event in which a person who is not affiliated with the association steals money. Every policy will come with different deductibles and limits.
The board members of an HOA management company are usually far from being experts when it comes to insurance. It is not always easy to understand just what type of insurance your association really needs. It’s important to talk to and get counsel from an insurance agent who is well-versed in this type of insurance law, in order to commit to the best plan for the company.
HOA board members should also carefully look through their Association’s governing documents to find specific insurance requirements of their Association. The HOA should be meeting every necessary requirement set forth by the state statues and by making sure that all state, federal or local laws apply.