Has your HOA reviewed its insurance policies lately? Many associations learn about coverage gaps between their primary and excess policies only after facing costly claims. Understanding these potential gaps is crucial for protecting your community’s financial well-being.
The common coverage gap trap
Think of your HOA’s insurance like a two-layer safety net. Even with a $1 million primary policy and a larger backup policy, dangerous gaps can exist between them. These gaps could cost your association significantly if not identified and fixed.
Here are three key areas where policies often misalign:
- Different coverage triggers: Your policies might have different rules about when coverage kicks in. One policy might respond only to reported claims, while another covers events as they occur.
- Inconsistent exclusions: Your primary and backup policies might contradict each other. For example, your primary policy might cover water damage, but your excess policy might not.
- Notice requirements: Each policy may have different deadlines and ways to report claims. Missing these requirements with either policy could result in denied coverage.
These misalignments are not just technical details; they can mean the difference between having full coverage and being left with significant out-of-pocket expenses. That is why it is crucial to understand how your policies work together.
Protecting your association
To avoid these dangerous gaps:
- Schedule annual reviews with your insurance professional
- Compare coverage terms between primary and excess policies
- Keep detailed records of policy changes
- Consider umbrella coverage to bridge potential gaps
Think of these steps as your HOA’s insurance maintenance plan. A small investment of time in reviewing your policies can save your association from significant financial exposure down the road.
The bottom line
Do not wait for a claim to expose coverage gaps. Regular policy reviews and alignment checks are essential risk management tools that can save your association from costly surprises down the road. Consider seeking legal counsel to help manage and review your HOA insurance coverage.