How to Buy Homeowners Association Insurance

There has always been a lot of confusion as to what the homeowners association covers and what each person's homeowners insurance covers. Use these steps to alleviate some of the confusion, and buy homeowners association insurance.

Difficulty:

Moderately Easy

Instructions

1. Research insurance companies before buying homeowners association insurance. The loss ratio varies greatly from company to company making the premiums also vary.

2. Shop around for an independent agent who has extensive knowledge on homeowners association insurance. Some of the larger insurance companies like State Farm and Travelers offer insurance packages specifically designed for homeowners associations.

3. Study homeowners association insurance policies thoroughly. Make sure your policy has fire and hazard, directors and officers liability, employee dishonesty and general liability coverage.

4. Consult with your insurance agent to see if you need additional coverage such as earthquake, building ordinance or law coverage. Earthquake coverage is only purchased if you live in a region that is likely to have earthquakes. Earthquake insurance is usually 10 percent of your premium. Building ordinance or law coverage is always good to have, as it covers increased construction cost if it is necessary to make building changes due to zone or building laws.

5. Determine what your premium should be with your agent. Deductibles start at $2,500. Of course the higher the premium, the less the homeowners association will have to come up with out of pocket.

6. Explain thoroughly to all homeowners in the plan that they must carry homeowners insurance and that the homeowners association insurance does not cover their contents or personal belongings.

7. Delegate that directors and officers be employees, so they can be covered under the employee dishonesty section of the homeowners association insurance.

Tips & Warnings

• In addition to homeowners association insurance there is also condominium association insurance which varies slightly in coverage. Talk with your insurance agent who will determine according to the structure of the buildings whether they are homes or condos.

• Reduce the number of claims the homeowners association insurance covers by stipulating to homeowners they must have their own homeowners insurance. This way the homeowners association insurance does not take on any claims they are not truly liable for.

• Before shopping around for homeowners association insurance, take the time to discuss with your board members exactly what the policy covers and what the deductible should be. This will save time and confusion by having everything planned out in advance.