Let us all join in the board volunteer’s prayer:
Grant me the serenity to accept the coverage requirements I cannot change, the courage to change policies when I can, and the wisdom to have D&O insurance for the rest.
Funny — but true. HOA insurance for small associations can be a steep learning curve about costs and risks you may not even understand yet. There are coverage requirements from your state or bylaws, surprising conditions that affect policy changes, and important protections for the brave souls making the decisions.
Insurance is often the biggest line item in a small HOA budget. Understanding some basics will protect your homes, your association’s financial stability, and maybe give you some peace of mind.
The Coverage Requirements You Cannot Change
A common board question: Why does our HOA even need insurance? All of our homeowners have it, and we have very little common area.
Both homeowners and the HOA need insurance coverage because they cover different things. HOA coverages are often required by your state or your association’s bylaws — or necessary because of mortgage lender requirements (more on this below).
Beyond that, HOA insurance matters because it’s financial protection for all homeowners. The right coverage protects owners from massive shared repair or liability costs.
Here’s a simple test: if 6, or 20, or even 50 households can’t comfortably write a six-figure check tomorrow, then insurance isn’t optional. It’s essential protection.
The Basic Insurance Stack for Most Small HOAs
Property Coverage — If the association has obligations for property like roofs, siding, or structures.
Business Coverages:
- General Liability (GL): Fundamental. Protects against injury and property damage claims in common areas.
- Directors & Officers (D&O): Protects board members from personal liability arising from decisions they make in their official roles.
- Fidelity: Protects against theft or misuse of HOA funds.
- Cyber Liability: Protects against risks tied to online information and financial transactions.
Some small associations also carry Umbrella / Excess Liability insurance, but it’s not always needed for smaller communities. And if the association directly employs staff, Workers’ Compensation is worth considering.
That’s a lot of coverage! But if an HOA only carries GL and Property, it is typically underinsured and exposed for some of the most common occurrences.
Why Cyber Liability Coverage Matters
Cyber Liability coverage is increasingly valuable because of online criminals and scams like phishing. If your HOA accepts or sends online payments — or uses any kind of online software — Cyber coverage is critical. It covers things like data breaches, ransomware attacks, and funds transfer fraud.
Coverage for the Brave Souls Making the Decisions
For board volunteers of a small HOA, sorting through all of these coverages can be intimidating. There are resources for advice and guidance — your insurance agent, MicroHOA’s insurance coordinator — but ultimately, it’s the board’s decision. Luckily, there’s even insurance for that.
Directors & Officers (D&O) insurance protects not just day-to-day decisions, but the judgment calls the board makes when trying to responsibly manage risk. Without it, volunteers may face personal exposure for making good-faith decisions on complex insurance matters.
D&O coverage is especially critical because it protects the board’s decisions about insurance itself. If owners later claim:
- The board purchased too little coverage
- The deductible was set too high
- The board overpaid for a policy
- Coverage decisions caused financial harm
Those allegations fall under governance and fiduciary duty — which is exactly what D&O insurance is designed to cover.
Note for Condo Associations: Why Mortgage Lender Requirements Matter
For condominium communities, insurance isn’t just about risk management — it directly impacts owners’ ability to buy, sell, and refinance.
Most conventional mortgages are backed by Fannie Mae or Freddie Mac, and these entities have specific insurance requirements for condo associations. If an association doesn’t carry compliant coverage, lenders may refuse to approve loans within the community.
That means insurance decisions made by the board directly affect marketability and owner equity. Ensuring compliance with Fannie Mae and Freddie Mac guidelines protects not only the association — but every homeowner’s ability to buy, sell, or refinance in the future.
The Courage to Change Policies When You Can
Whether your HOA’s insurance carrier has left the market, your HOA has been non-renewed, or it’s simply time for a new policy — there are some surprising realities to the insurance bidding process.
Competitive Bidding Can Actually Work Against You
You don’t “shop” for HOA insurance the way you shop for landscaping, roof repair, or management. Sending requests from the same HOA to five different agents usually does not create better pricing — it often creates market confusion. Duplicate submissions can result in underwriters blocking each other, slower turnaround, and sometimes worse terms.
When it’s time for new insurance, a trusted agent can be your best advocate.
What to Prepare Before Requesting Quotes
A little up-front organization makes the process easier. When boards aren’t prepared, quotes take longer and come back incomplete or inaccurate. Before requesting quotes, gather:
- Current policies
- Loss runs
- Property details
- Governing documents
- Accurate building values
- Prior carrier information
Protect Your Community, Your Volunteers, and Your Budget
Insurance is often the biggest line item in a small HOA budget — and getting it right matters. The right coverage choices will:
- Shield volunteers from personal financial exposure
- Prevent devastating special assessments
- Protect the association’s reserves
- Preserve marketability and lender eligibility
Connect with MicroHOA’s resources to help you navigate insurance and other common challenges for small HOAs.
