Questions about insurance

The builder just passed the HOA to us last month, and the PM we had is backing out... which from looking at the paperwork we've been giving it's kind of good riddance since they've done a horrid job.

So now we're filling out the insurance form to get some quotes. It's asking for what we want in regards to Limits, Deductible, and Effective Date, but though I know the date I'm not sure what the standards are for the other two. Any suggestions?

Thanks ..

Sam

Sam,

As Glen pointed out, the amount of insurance varies from Association to Association. Some States require specific insurance amounts and you should therefore, check your State statutes so you at least get the minimum.

Typically you need:

Commercial Liability - amount $1 million minimum (as this is what most banks are looking for when considering loans/mortgages)

Directors and Officers (D&O) also known as Non-Profit Management and Organization Liability Insurance - we have a $1 million policy and I think this is fairly standard but I'm not sure.

Employee Crime - Serves as the fidelity bond for our Officers and employees. In VA the minimum amount is set by state law. For our Association this works out to be about $400,000. This is what the law says:
"Such bond or insurance policy shall provide coverage in an amount equal to the lesser of $1 million or the amount of the reserve balances of the association plus one-fourth of the aggregate annual assessment income of such association. The minimum coverage amount shall be $10,000."

Additional insurance (like umbrella insurance) may be appropriate depending on the type of development and the amenities provided.

The deductible is something the board needs to figure out. The higher the deductible the lower the premium but the Association will need to eat more of the expense for a covered claim.

Hope this helps,

Tim

Our documentation laid out the insurance coverage we were required and that of the vendor's we hired. It was a million dollar policy. So check your documents to see the minimum amount of insurance your HOA is required to have.

Many insurance companies offer "Package plans" when it comes to HOA insurance. So you may get stuck with some coverages like "HOA car insurance" even though your HOA does NOT own a vehicle. That insurance would kick in to cover the difference if a board member while in progress of doing a HOA duty was in an accident instead. So be aware that there could be small things like that when you get insurances.