Important Tips with Purchasing Insurance

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By Jon H. Epsten, Esq.

One of the most important roles a board performs is the purchase of association insurance protecting the association’s assets and its directors, officers and committee members.  Be mindful that most Directors and Officers insurance policies EXCLUDE coverage for the failure of the board to purchase adequate insurance.

Oftentimes I find that association boards spend more time on landscaping issues (e.g., tree trimming, grass cutting and watering) than the purchase of the association’s insurance. In the board’s defense, the squeaky wheel gets the oil and most owners, and oftentimes the board members, care much more about the landscaping than they do about the adequacy of the association’s policies. For this reason, the focus on insurance often becomes secondary to the cosmetic issues an association faces. Not making insurance a number one priority can have devastating consequences to an association. A book could be written on how to make certain your association has adequate insurance!

Let me offer a few basic tips:

  • Use insurance agents who are well versed in association insurance.
  • Review the insurance application and be certain that known or threatened claims have been carefully reported.
  • Have the insurance agent perform policy comparisons showing the different coverages in each policy being offered.
  • Ask questions of the insurance agent, don’t assume he/she knows your association’s liability risks (e.g., association having responsibility to insure an easement area).
  • Talk to your insurance agent about the different types of policies available such as earthquake and cyber insurance.
  • Do not make your decisions based on the amount of the premium but rather on the quality of the coverage.
  • Don’t save money by buying lesser insurance – your association will get what it pays for, guaranteed.
  • Always ask your agent in writing, “Do you have any recommendations on coverage?” Your agent should provide a letter stating that he/she has reviewed the coverages and the coverages comply with the CC&RS and the law, thus placing the onus on your insurance agent.
  • Lastly, meet with your agent no less than annually to check on the health of your insurance coverage.

I urge boards to make insurance a priority and devote the necessary time to make certain the best possible coverage is in place.