Financial crime in Homeowners’ associations (HOAs) is rising. Unfortunately, embezzlement may involve directors, officers and managers.
Keep in mind that HOA law is complex. State laws vary. And sometimes, it is governed by local rules. In Michigan, no law requires homeowners’ associations to carry crime and fidelity insurance. In Illinois, any condominium association with six or more dwelling units must obtain such insurance.
Unfortunately, associations are especially vulnerable to these crimes. It occurs because volunteers often comprise them.
What are crime and fidelity insurance?
Crime and fidelity insurance, protects a homeowners’ association’s money from theft and other financial crimes, including:
- Embezzling
- Computer fraud
- Wire fraud
Often, association volunteers do not have the necessary training. More importantly, they may not be licensed professionals. Such a circumstance can make holding them accountable more difficult. Average crime and fidelity insurance cover theft-related offenses from anyone managing the association.
Limits of Insurance
When considering coverage limits, look to state law for guidance. State statutes will tell you how much to purchase. And state statute will specify what it must cover.
Crime within these tight-knit communities can be challenging to imagine. Still, it is vital to protect the interests of everyone in the community. Certain precautions are necessary.