HOAleader.com - Tip of the Week - April 22, 2011
Published: Fri, 04/22/11
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Four Insurance Policies Your HOA Must--or Should--Have
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In this week's tip, we explain four insurance coverages your
association must have or should seriously consider.
1. A General Liability Policy
"The two basic coverages you need for any condo association are
property insurance covering the building--which means the common
areas and the units--to 100 percent of your replacement cost,"
explains Robert Galvin, a partner at Davis, Malm & D'Agostine PC
in Boston who specializes in representing condos and co-ops.
"With property insurance, the question always is: What does it
cover? That depends on how the condo documents are written. If
the documents are correct, if you could pick up the building,
turn it upside down, and shake it, everything that falls out
wouldn't be covered."
2. Liability Insurance
"Then you need liability insurance," adds Galvin. "In
Massachusetts, it's normally $1 million, but you can have more.
Remember that the liability insurance policy the association buys
doesn't cover things that take place inside the unit. If an owner
has a guest in his unit who slips, falls, and sues your
association, the association policy doesn't cover it."
How much liability insurance should your HOA buy? "The rule of
thumb is to buy as much liability insurance as you can afford,"
says Alan S. Chesler, a partner at Alan James Insurance in
Sunrise, FL, which specializes in commercial and residential
property insurance, including condos, HOAs, and co-ops. "It's
reasonably priced in Florida, and a basic policy includes limits
of $1 million per occurrence and $2 million in the aggregate.
That would be the minimum I'd expect an association to purchase."
3. A Directors and Officers Policy
"For my board members, we explain that D&O is so important,"
says Kristen L. Rosenbeck, a partner at the Mulcahy Law Firm PC
in Phoenix, which represents associations. "Board members are
volunteers, and I'd never volunteer on a board unless I knew I
had D&O coverage and that it was adequate for the specific
community I was involved in."
4. An Employee Dishonesty or Crime Bond
"This protects your association's assets from theft by the board
or an employee," says Chesler, "and it includes bank assets."
To learn about four other coverages your association may require,
see our new article: http://www.hoaleader.com/members/563.cfm
Best regards,
Matt Humphrey
President
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Recent articles posted at HOAleader.com:
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Four Insurance Policies Your Homeowners Association Must--or
Should--Have
In this week's tip, we explain four insurance coverages your
association must have or should seriously consider.
Click here to read full article:
< http://www.hoaleader.com/public/564.cfm >
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HOA Insurance Primer, Part 2: Eight Coverages to Consider
Your homeowners association must have insurance, but it doesn't
have to waste money on coverage it doesn't need. Here we explain
eight coverages your HOA should have, including some that aren't
standard but that your association should consider.
Click here to read full article:
< http://www.hoaleader.com/members/563.cfm >
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HOA Insurance: What You Need to Know -- Part 1
The cost of insurance can hamstring an HOA. That's why it's
important to understand HOA insurance basics so you and your
board of directors can intelligently evaluate insurance bids.
Here, in part one of a two-part series, we explain how to
determine what coverages your HOA must have, how to determine the
value of the property you must insure, and extra coverages to
consider.
Click here to read full article:
< http://www.hoaleader.com/members/562.cfm >
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HOA Taxes: What's Exempt Under the 90-Percent Rule?
You have two options when you file your HOA's tax return. One is
to file as a corporation, and the other is to file under Section 5
28 of the Internal Revenue Code. Most associations opt for the
Section 528 treatment because if almost all your HOA's income is
from assessments and almost all of your expenses are for
maintaining association property, you don't have to pay taxes. To
qualify under IRC 528, your association must meet several
requirements, one of which is that at least 90 percent of your
association's expenses must be exempt, which means they're
operating and capital expenses that directly affect association
property. But which expenses are exempt, and which aren't? Here's
a rundown.
Click here to read full article:
< http://www.hoaleader.com/members/560.cfm >
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Creating New HOA Rules? Should You Grandfather or Not?
Let's just say the dog situation has taken a turn for the worse,
and many of your HOA's owners want to change your rules to ban
dogs. Naturally, dog owners are aghast and want to be "
grandfathered" into the rule, meaning that they'd be exempt.
Should you grant their request?
In this week's
Click here to read full article:
< http://www.hoaleader.com/public/559.cfm >
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