COMMUNITY ASSOCIATIONS
Insurance Built Around the Association's Responsibilities
Condominium, townhome, and homeowners associations can have very different responsibilities for property, common elements, finances, governance, employees, contractors, and other community operations. Those responsibilities help determine what the association needs to protect.
​
Crump Management Group works with boards and community managers to understand how the association is structured, what it owns or is responsible for, and the obligations established by its governing documents before evaluating the insurance program.
Start With What the Association Is Responsible For
Community association insurance should not begin with a standard list of policies. It should begin with understanding the association itself.
​
The declaration, bylaws, plats, amendments, management agreements, property records, reserve information, and other available documents can help establish what the association owns, maintains, insures, or is otherwise responsible for. The physical property and operations then need to be evaluated alongside those obligations.
​
That analysis can look very different for a condominium association than for a townhome or homeowners association.
Governing Documents
Governing documents can establish responsibilities for property, maintenance, insurance, assessments, governance, and other association obligations. Insurance requirements should be identified from the actual documents rather than assumed based on the type of community.
Property & Common Elements
Buildings, common structures, pools, clubhouses, fencing, monuments, private roads, recreational facilities, equipment, and other property may fall within the association's responsibility depending on how the community is structured. Identifying what the association owns or is responsible for, and what the governing documents require it to insure, is the starting point for evaluating the property program.
Property Valuation
Once the property to be insured has been identified, the next question is value. Replacement cost estimates, appraisals, reserve studies, construction information, and other available sources may help evaluate whether property limits reasonably reflect the assets the association is responsible for insuring.
Association Finances
Associations may hold operating funds, reserves, assessments, and other financial assets. Understanding how much money is held, who has access to it, and how funds are handled helps evaluate crime and fidelity coverage.
Governance & Operations
Boards make decisions involving contracts, assessments, enforcement, maintenance, vendors, employees, and other association matters. Those responsibilities can create management, employment, liability, and other risks that should be considered alongside the property program.
Condominium Insurance Begins With the Unit Boundary
Condominium associations present an additional question: where does the association's responsibility end and the unit owner's responsibility begin, and how does that allocation affect the insurance program?
​
Terms such as "bare walls," "single entity," and "all-in" are commonly used to describe different approaches to condominium property insurance, but those labels alone do not establish what a particular association must insure. The declaration, applicable law, and actual policy language should be reviewed together.
​
Depending on the association, the insurance responsibility may involve portions of the building structure, original unit components, fixtures, improvements, common elements, or other property. The objective is to understand what the association is required to insure and then evaluate whether the policy reflects that responsibility.
The Risk Isn't Only the Property
Community associations operate organizations as well as maintain property. Boards and managers make decisions, funds are collected and disbursed, contractors perform work, residents and guests use common areas, and some associations have employees.
​
Those activities create risks beyond damage to buildings and common property.
Board & Management Decisions
Claims may arise from allegations involving enforcement, assessments, elections, contracts, maintenance decisions, discrimination, or other actions taken in managing or governing the association. The D&O program should be evaluated based on who and what it protects, the claims it is intended to address, and the exclusions and other terms that may affect coverage.
Association Funds
Operating funds, reserves, assessments, and other association money can create theft and fraud exposure. Crime and fidelity coverage should be evaluated based on the association's finances, how funds are handled, and any requirements applicable to the association.
Common Areas & Amenities
Pools, clubhouses, playgrounds, fitness facilities, streets, sidewalks, lakes, recreational areas, and other amenities can create property and liability considerations depending on what the association owns or is responsible for.
Employees & Contractors
Associations may use employees, management companies, maintenance vendors, contractors, and other service providers. Those relationships can create different liability, workers' compensation, employment, contractual, and insurance considerations.
.jpg)
Association Insurance Can Affect More Than a Claim
For some communities, particularly condominium projects, the association's insurance program can affect whether individual units satisfy requirements associated with mortgage financing.
​
Requirements established by lenders, investors, or secondary-market programs may address property coverage, deductibles, fidelity or crime coverage, liability, and other elements of the association's insurance program. The requirements that apply depend on the community, financing, and applicable standards.
​
These considerations should be evaluated separately from the association's governing-document requirements. What the association is required to insure and what a lender or financing standard requires are related questions, but they are not necessarily the same question.
Relevant Solutions
Property & Casualty
Protection for the property, income, operations, and liability risks associated with commercial property ownership.
Management & Professional Liability
Protection for certain claims arising from management, employment, and other decision-making responsibilities associated with the organization or ownership entity
Business & Executive Continuity
Planning for ownership and key-person risks where the business or ownership structure depends heavily on specific individuals.
Advisory Services
Ongoing analysis and guidance around valuations, insurance requirements, renewals, claims, and changes affecting the insurance program.
.jpg)
Frequently Asked Questions
"Bare walls," "single entity," and "all-in" are commonly used terms for different approaches to condominium property insurance, but the terminology is not a substitute for reviewing the association's actual requirements. The declaration, applicable law, unit boundaries, and policy language should be evaluated to determine what property the association is responsible for insuring and what remains the responsibility of individual unit owners.
The appropriate limit depends on the association's financial exposure and any requirements that apply to the community. Operating funds, reserves, assessments, access to funds, governing-document requirements, and applicable lender or financing standards may all be relevant when evaluating the amount of coverage.
If the cost of a covered loss exceeds the amount recoverable under the association's insurance, the association may have to address the remaining financial obligation through available funds, reserves, assessments, or other means. Coinsurance provisions, deductibles, valuation terms, sublimits, and other policy provisions may also affect the amount recovered after a loss.
The starting point is the association's governing documents and applicable law. The declaration and related documents may establish what property the association owns or is responsible for maintaining or insuring. Those requirements should then be compared with the physical property, available valuations, and the insurance policy itself.
Property limits should begin with identifying the property the association is responsible for insuring and the valuation basis required by the policy or other applicable requirements. Replacement cost estimates, appraisals, reserve studies, construction information, property characteristics, and improvements may all provide useful information when evaluating those limits. No single source should automatically be treated as establishing the appropriate insurance value.
The program should be evaluated when meaningful changes occur, not only at renewal. Property improvements, new amenities, changes in values, amendments to governing documents, changes in association finances, claims, new contracts, financing requirements, and other developments can affect the association's insurance needs.
Boards and other association decision-makers can be named in claims alleging wrongful acts involving governance or management of the association. D&O insurance can provide protection for the association and insured individuals against certain covered claims. The scope of protection depends on who qualifies as an insured, the definition of wrongful act, exclusions, defense provisions, and other policy terms.
Yes. For some communities, particularly condominium projects, lenders or secondary-market programs may establish insurance standards that affect unit financing. The applicable requirements depend on the project, loan, and current financing standards, so they should be evaluated separately from the association's own governing-document requirements.