Homeowners’ associations (HOAs) in Texas often face complex insurance requirements, and many overlook essential coverage options. While standard policies cover the basics, some areas can slip through the cracks, leaving communities vulnerable to significant financial risk.
Directors and officers (D&O) insurance
One of the most commonly overlooked insurance needs in Texas HOAs is Directors and Officers (D&O) insurance. D&O insurance protects HOA board members from personal liability due to alleged wrongful acts or errors made while performing their duties. Without this coverage, board members can be personally sued for decisions related to property management, governance, or financial mismanagement.
Crime and fidelity coverage
Crime and fidelity coverage is another often overlooked aspect of HOA insurance. HOAs handle large sums of money, particularly in the form of member dues and fees. This makes them a target for embezzlement, fraud, or theft. Crime and fidelity insurance helps protect against losses resulting from dishonest acts by employees, contractors, or board members. Failing to include this coverage exposes the HOA to potential financial devastation.
Environmental and flood insurance
While Texas is prone to severe weather, many HOAs fail to secure the proper environmental and flood insurance. Standard property insurance policies often exclude damages caused by floods, storms, or hurricanes. In flood-prone areas, HOAs should ensure they carry specialized coverage to protect against the financial fallout of a natural disaster.
Equipment breakdown insurance
Another overlooked insurance policy is equipment breakdown insurance. This coverage protects against mechanical breakdowns of essential equipment, such as HVAC systems, elevators, and security systems. Without this coverage, an HOA could face costly repairs or replacements that disrupt daily operations.
Proper insurance coverage ensures HOAs can protect themselves from unexpected financial burdens. Board members should regularly assess their policies and consult insurance experts to ensure comprehensive coverage that addresses all potential risks.