Timothy Cline Insurance Agency, Inc.
Homeowner Associations »
How Much Coverage Is Enough?
Boards should be advised to review their governing documents
to determine how much coverage they are required to maintain.
Many homeowners associations endevavor to meet the minimum requirements
of the institutional lenders, such as FannieMae or Freddie Mac.
(Please see the following examples (Hypertext Link to Fannie
Mae and Freddie Mac Insurance requirements here).
FannieMae, requires a bond equal to three months operating expenses
PLUS reserves. Most boards are interpreting this requirement
as three months gross homeowners dues plus the current Reserve
balance.
No homeowners association can eliminate the risks associated
with fraudulent employee, fellow board member or management agent,
but by maintaining the proper insurance and a risk prevention
system, exposure can be minimized and the chances for major financial
losses reduced.