Major HOA Insurance Issues Every Board Should Address
Hello, everyone. This is Mark Saunders with Saunders HOA Management. Thanks for checking out this blog post. In our HOA management work in Winston-Salem, North Carolina, we’ve come across a major issue with HOA insurance that every board needs to address.
Let me share a real-life example. A couple of years ago, we signed our first community with 57 townhouse units. We quickly discovered they didn’t have adequate homeowners association insurance coverage. The HOA was responsible for maintaining the exterior of the buildings, but their insurance only covered common areas like signage and mailboxes—not the exterior structures.
At first, I thought this was an isolated issue. But as we took over more neighborhoods, we found that this problem is actually pretty common. Currently, two other new communities we’re managing are facing similar insurance challenges.
Understanding Homeowners Association Insurance Coverage
HOA insurance, or home owner association insurance, is essential for protecting both the association and homeowners. The big confusion often comes from understanding who is responsible for covering what. For example, the HOA typically covers common areas and the exterior of townhomes, while homeowners' policies should cover the interior.
However, as we've seen, many HOAs assume they have full coverage when in reality, their policies only cover limited parts of the property. This is where major issues in insurance arise.
To help clarify this, I reached out to my friend Van Allman from Peak Insurance Group. Van has been in the insurance industry for over 21 years, and together, we’ve worked on addressing insurance gaps for several communities.
What Could Go Wrong?
Imagine this: A tree falls through the roof of one of your HOA's townhomes. The HOA assumes their master policy will cover it, but it turns out the coverage only applies to common areas like the clubhouse or parking lot. Now, homeowners are stuck paying for repairs out of pocket.
This type of insurance misunderstanding can lead to serious financial issues for both the HOA and homeowners. Van explained that many HOAs are underinsured or have outdated policies that don’t align with their bylaws.
Bylaws Matter—A Lot
The HOA's bylaws play a huge role in determining who is responsible for various parts of the property. If the bylaws are unclear, it becomes easy for insurance issues to arise. In one of our first neighborhoods, the bylaws stated the HOA would cover the exterior, but the insurance policy didn’t reflect that. We had to update the bylaws and secure a new insurance policy to ensure proper coverage.
This process took about a year and involved securing a new policy costing approximately $18,000 annually, but the result was comprehensive homeowners association insurance coverage, ensuring both the exterior and interior are protected.
What Should Your HOA Do?
If you're living in a townhome or any community where the HOA is responsible for parts of the property, make sure to ask your board about your homeowners association insurance. Here's what to check:
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Is the exterior of your home covered by the HOA insurance?
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Are common areas and shared spaces included?
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Are your HOA bylaws clear on what’s covered?
Without the right coverage, homeowners could end up paying out of pocket for major damages, which can be avoided with proper homeowners association insurance.
For those in Winston-Salem or the surrounding area, Van Allman at Peak Insurance Group can help review your HOA insurance policy to make sure it's up to date and covers everything it should.
You can contact him at 336-773-1322 or van@peakgroup.insure.
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