By Devon Schad, Schad Agency
“The most expensive assumption in an HOA is believing someone else’s insurance will cover it.”
HOA insurance isn’t one policy. It’s two policies that have to work together.
At a high level, the association insures the building and common elements. Owners handle their personal property and some portion of the unit. The issue is what the association covers inside the unit can vary a lot, bare walls, original construction, all-in, or somewhere in between. And that’s where things go sideways.
Most claim issues aren’t because there’s no coverage. It’s because no one was clear on who was responsible. That’s something Associations can fix.
One of the best things a Board can do is create a simple maintenance and insurance responsibility chart. Spell out who handles what from the structure, interiors, and systems. Take the guesswork out. If people have to interpret it, you’re already in trouble. That chart should tie back to the CC&Rs. Not just the insurance section, but the definitions too for what is a unit, what are common elements, what falls in between. A lot of times those definitions drive responsibility more than anything else.
If it’s not clear, don’t guess. Get the association’s attorney involved and clean it up now. It’s a lot easier to deal with on the front end than during a claim when everyone is looking for answers.
Associations can also make life a lot easier at claim time with a few basic steps. Have a clear deductible policy so owners understand how that gets applied. Have a simple claim process for how to start a claim, who to call, how it gets reported, what to expect. When those things are defined ahead of time, claims go a lot smoother. Boards that do this well aren’t just handling insurance better. They’re reducing conflict, setting expectations, and avoiding a lot of unnecessary headaches.
Owners still need to do their part. Review the CC&Rs. Get a copy of the master policy or COI. Then sit down with your insurance agent and make sure your coverage lines up with how the association is set up. If your personal agent hasn’t asked for these documents they may not be the best to advise you on covering any gaps. When it works, the two policies fit together the way they should. When they don’t, that gap lands on someone and it’s usually the owner.
Most insurance problems in HOAs aren’t about coverage. They’re about confusion. The Associations that remove that confusion ahead of time are the ones that handle claims the best. It doesn’t take much just clarity, consistency, and communication. Put it in writing, make sure everyone understands it, and revisit it as things change.
Because once a loss happens, you’re no longer planning, you’re reacting!
About the Author: Devon Schad currently serves as President of the Board of Directors for the CAI Rocky Mountain Chapter and is a CAI Educated Business Partner. He is the owner of the Schad Agency, a family-owned insurance firm established in 1976 that specializes in insurance solutions for community associations. Devon works closely with HOAs, property managers, and attorneys on insurance program design, including coverage structure and insurance provisions within CC&Rs. He regularly contributes articles to the industry and teaches certified CMCA education courses focused on risk management and insurance for community associations.
