Community Association Insurance: How to Evaluate and Review Coverage

Insurance helps community associations manage risk, protect shared assets, and reduce unexpected financial strain. Regularly reviewing coverage, legal requirements, and the division of responsibility between associations and owners can help communities make better insurance decisions.

Consider these key areas when evaluating or updating coverage.

MONITOR COVERAGE

Effective insurance oversight typically includes:

• Reviewing insurance coverage annually with qualified professionals
• Updating coverage after major repairs, renovations, or valuation changes
• Ensuring compliance with governing documents and legal requirements
• Educating board members and owners on coverage responsibilities

SELECT A POLICY

• Work with qualified professionals. An insurance agent, broker, or legal counsel specializing in common interest developments can help interpret policy language, identify gaps, and address state laws, lender requirements, and governing documents. Look for professionals with CAI’s Community Insurance and Risk Management Specialist (CIRMS®) designation and attorneys who are fellows in CAI’s College of Community Association Lawyers (CCAL™).
• Evaluate current and emerging risks. Consider necessary coverage, desired additions, and any new projects, activities, or assets since the last review.
• Compare policy features and exclusions. Use a standard comparison form so proposals can be reviewed on an equal basis.
• Review premiums, deductibles, and exposure. Understand deductible limits and any special financial considerations.

CHECK STATE LAW

State laws, including versions of the Uniform Common Interest Ownership Act and Uniform Condominium Act, may mandate specific insurance policies for community associations.

UNDERSTAND YOUR DOCUMENTS

Governing documents often distinguish maintenance responsibilities from insurance responsibilities. Associations usually maintain common elements and shared risks, while unit owners typically maintain property attached to the interior of their units.

However, the insurance section may require the association to cover interior fixtures such as floor coverings, cabinets, countertops, and bathroom fixtures—even if the owner remains responsible for maintenance.

Insurance does not change who must maintain or repair property; it identifies where funds may come from after a covered loss.

KNOW THE ROLES

An insurance agent represents one company. A broker can solicit and negotiate coverage from multiple companies on behalf of an association. The insurance company, carrier, or insurer underwrites the policy and pays claims.

Because carriers typically release one quote to the first broker with a complete submission, communities should work with one qualified broker who can gather accurate data for multiple underwriters.

Brokers who hold CAI’s Community Insurance and Risk Management Specialist (CIRMS®) designation are the most qualified professionals to help associations seek favorable outcomes.

MANAGE RISK

Insurance is one part of a broader risk management program. Associations also can reduce financial loss by avoiding, controlling, or accepting risk:

• Avoiding risk: Remove exposures that could cause damage or injury, such as a hazardous tree near a building.
• Controlling risk: Use proactive maintenance, inspections, reserve studies, leak detection, and other preventive measures to reduce the likelihood of costly failures.
• Accepting risk: Recognize that some exposures, such as normal wear and tear, cannot be transferred to an insurer.

>>Find more guidance in Insurance in Community Associations, CAI’s new brochure developed with expert input from Community Insurance and Risk Management Specialists. 

The guide covers additional coverage options, common exclusions, and steps communities can take to review coverage. It is available in print and digital versions; CAI members may access the digital version for free.