The Four Insurance Coverages Every Community Association Needs and Where Most Programs Have Gaps

The architectural review committee denied a homeowner’s request to add a pergola. The homeowner hired an attorney. The lawsuit named the association  and the three board members who voted on the denial, individually, by name.

This is not a hypothetical edge case. It is a pattern playing out in community associations across the country in 2026, and board members who assumed their volunteer status provided meaningful personal protection are discovering otherwise. According to research cited by Kevin Davis Insurance Services, 31 percent of homeowners believe their HOA board has too much power. This figure correlates directly with the likelihood of disputes escalating to litigation when homeowners feel a decision was wrong.

What D&O Actually Covers

D&O insurance protects board members and the association against claims alleging wrongful acts related to the performance of governance duties. These claims can arise when homeowners allege that the board enforced rules inconsistently or selectively, mishandled election procedures, made arbitrary or discriminatory architectural decisions, failed to follow governing documents, or breached its fiduciary duties through financial management decisions.

When a claim is covered under the policy, D&O insurance typically provides coverage for legal defense costs, which are often the most significant financial exposure in governance disputes, as well as indemnification for settlements or judgments up to the policy limit. Board members receive defense counsel, and their personal asset exposure may be limited to amounts that exceed the available policy coverage.

What D&O Does Not Cover

D&O does not cover bodily injury or property damage. Those claims fall under general liability coverage. Intentional fraud and criminal acts are excluded. Actions taken outside a board member’s official authority are typically excluded. Suits between covered persons, such as one board member suing another or the association suing a former director, are generally excluded, though some policies include carve-backs for non-collusive disputes.

The policy is written on a claims-made basis, which means the coverage in force when the claim is reported is the coverage that applies. Boards that change carriers or allow coverage to lapse need to address prior acts coverage and extended reporting periods. These gaps can leave past decisions without coverage even when a new policy is in place.

How Much Coverage Is Enough

For most associations, a minimum of $1 million in D&O limits is appropriate. Communities with 50 or more units, active common areas, a history of governance disputes, or an active litigation environment should consider carrying $2 million to $5 million in coverage. D&O premiums for community associations in 2026 typically range from $900 to $5,000 annually for small to mid-sized communities. This makes D&O one of the most cost-effective coverages in any insurance program given the level of protection it provides.

Annual D&O reviews should confirm that the policy’s retroactive date provides full prior acts coverage and that limits remain appropriate based on changes in community size, operations, or litigation history. Specialty programs for community associations include D&O policy structures designed specifically for the governance dynamics of HOAs and condominium boards.

Ready to make sure your board members are protected? The team at Tooher-Ferraris has been helping community associations and their leadership since 1932. Contact us today to schedule a no-obligation consultation.

When your association renewed its property insurance in 2021 or 2022, the building’s insured value was set based on construction costs at that time. Since then, those costs have not come down. They have gone up and in most markets, they remain 15 to 20 percent above pre-pandemic levels, according to Gallagher’s 2026 construction market analysis.

If the insured value of your association’s property hasn’t been formally updated since then, there is a reasonable chance the community is significantly underinsured. The time to discover that gap is not during a catastrophic fire, flood, or structural failure, it is now.

Why the Numbers Matter More Than Most Boards Realize

Property insurance for community associations is not simply about having a policy in place. It is about having a policy that will actually fund a rebuild after a total or major loss. When insured values lag behind actual replacement costs, the consequences arrive in two forms.

The first is straightforward: if the building is insured for less than it would cost to rebuild, the insurance payout will not cover reconstruction. The shortfall becomes the association’s problem which typically means a special assessment on homeowners at the worst possible time.

The second consequence is less widely understood: the coinsurance penalty. Most commercial property policies include a coinsurance clause requiring the insured value to equal at least 80 or 90 percent of actual replacement cost. If insured value falls below that threshold at the time of a loss, the carrier is entitled to apply a coinsurance penalty, reducing the claim payout proportionally, even on a partial loss that would otherwise be straightforward. An association that insured a clubhouse for $1.2 million based on 2020 valuations, when 2026 replacement cost is $1.6 million, could face a significant penalty on even a partial fire loss.

What an Insurance Appraisal Does

An insurance appraisal is distinct from a real estate appraisal, which establishes market value. An insurance appraisal determines the actual cost to rebuild or replace a structure at current construction prices. The appraisal accounts for current material costs, labor rates, code compliance upgrades that would be required in new construction, and debris removal.

According to the Community Associations Institute, insurance appraisals are considered best practice for any association with shared buildings and should be updated every three to five years or whenever significant renovation, addition, or meaningful construction cost changes warrant a review. Associations that haven’t reviewed property values in three or more years are the ones most likely to discover a meaningful gap.

What to Do Before the Next Renewal

Start by asking when the property was last formally appraised for insurance purposes and whether the current insured value reflects today’s construction costs. If the answer involves an estimate, a prior-year escalation factor, or an appraisal more than three years old, an updated appraisal is warranted. For associations with January renewal cycles, July is the right time to initiate this process. Appraisal results typically take four to eight weeks, leaving adequate runway for the renewal conversation. Specialty programs for community associations include property coverage structured around accurate replacement cost valuations, with program advisors who can facilitate the appraisal referral.

Ready to confirm your association’s property is insured for what it would actually cost to rebuild today? The team at Tooher-Ferraris has been helping community associations since 1932. Contact us today to schedule a no-obligation program review.

The conversation used to happen after the offer was accepted. Increasingly, it is happening at the showing.

“What will insurance cost on this place?” “Does a roof this old even qualify?” “We’re in a flood zone. What does that mean for our mortgage?” “Why is the deductible so high on a house at this price?”

These questions are coming earlier in the buying process, and for good reason. Homeowners insurance has become more expensive, harder to qualify for, and more variable by property than most buyers expect. In some markets, insurance costs are affecting affordability calculations more meaningfully than rate changes. Buyers who discover insurability problems after going under contract are losing earnest money, blowing up timelines, and sometimes walking away entirely.

Real estate professionals who can navigate these conversations intelligently, connecting buyers with the right resources at the right moment, create a smoother transaction and a stronger client relationship. Those who handle them carelessly create liability.

What Buyers Are Actually Worried About

The questions brokers are hearing in 2026 reflect a market where insurance is no longer a formality. Buyers want to know whether a property’s roof age will trigger a denial or a dramatically higher premium before they invest in inspections and appraisals. They want to understand flood zone designations and whether National Flood Insurance Program coverage is required by their lender. They are asking about deductible structures in wind-prone areas, insurance-to-value requirements, and whether a prior claims history on a property will affect their ability to get coverage.

According to a 2026 survey from Bankrate, more than one in three homebuyers say insurance costs played a role in which home they ultimately purchased. This figure reflects how dramatically the homeowners insurance market has shifted over the past three to four years. Buyers who do not get insurance guidance until post-contract are increasingly finding surprises they did not budget for.

Where the Value Is and Where the Liability Is

The real estate professional who helps a buyer connect with a knowledgeable insurance advisor early in the search process creates measurable value: fewer failed transactions, fewer last-minute surprises, and buyers who feel genuinely supported through a complex process. That is a competitive differentiator that referrals notice.

The liability enters when agents cross from connecting buyers to insurance professionals into offering insurance assessments themselves. A broker who tells a buyer “this home should be easy to insure” or estimates monthly premium costs is making a professional representation outside the scope of their real estate license. If that representation is wrong and the buyer encounters an unexpected denial, a surcharge, or a cost that affects their ability to close, the E&O exposure is real.

The right approach is a specific one: refer early, refer specifically, and document the referral. Telling a buyer, “You should speak with a licensed insurance professional before we get too far into this search,” is a responsible approach. It positions the broker as a knowledgeable advocate who recognizes that insurance has become an important part of transaction due diligence rather than something addressed after the fact.

Building the Right Referral Relationship

The most effective brokers in markets with complex insurance environments have cultivated relationships with independent insurance advisors who understand residential property risk and can give buyers a preliminary read quickly. Tooher-Ferraris works with real estate professionals to support their buyers with straightforward, no-pressure home insurance conversations early in the process. The goal is to help transactions close without surprises, not to become a speed bump. Visit our specialty programs page to learn more about how we work with real estate professionals.

Ready to build an insurance referral relationship that adds value to your transactions? The team at Tooher-Ferraris has been helping families and professionals navigate homeowners insurance since 1932. Contact us today to learn how we work with real estate professionals.