Why Buyers Are Asking Their Agent About Insurance and How Smart Brokers Add Value Without Creating Liability

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.

It starts innocently. A buyer is walking through a house and asks, offhandedly, what insurance on a place like this would cost. The agent gives a rough number. The buyer uses that number in their budget. The actual quote comes in 40 percent higher. The buyer closes anyway, but now the monthly payment is uncomfortable, the relationship is strained, and if anything goes wrong downstream, there is a paper trail connecting the agent’s estimate to the buyer’s decision.

That is how E&O claims in real estate often begin: not with a dramatic professional failure, but with a casual comment that crossed a line the agent did not realize was there.

Insurance questions from buyers and sellers are coming earlier and more frequently than ever. In a homeowners insurance market defined by rising premiums, restricted carrier availability, and properties that are harder to insure than they appear, the gap between what a buyer expects and what insurance actually costs has never been wider. That gap is exactly where E&O exposure hides.

The Five Statements That Create Liability

Professional liability claims tied to insurance conversations in real estate typically involve one of five categories of misstatement. Each one is common. Each one is avoidable.

“This house should be easy to insure.” Insurability depends on roof age and condition, the property’s claims history, proximity to fire stations, construction materials, and market-specific carrier appetite. None of these are visible from the showing. An agent who implies a property is straightforwardly insurable is making a professional representation that only a licensed insurance professional can make accurately.

“Insurance on a home like this usually runs around X per month.” Premium estimates are underwriting determinations. They vary by carrier, the buyer’s own claims history, the property’s specific characteristics, and coverage structure. A number cited by an agent, even a well-intentioned one based on their own prior policies, creates the impression of professional guidance it cannot back up.

“The roof should be fine.” Roof age and condition are among the top factors carriers use to determine both eligibility and premium. Stating that a roof “should be fine” for insurance purposes requires knowledge of carrier guidelines the agent does not have.

“You probably don’t need flood insurance here.” Flood zone designations can be complex, and whether flood insurance is required, recommended, or optional depends on FEMA flood map designations, lender requirements, and the buyer’s own risk tolerance. Agents who opine on flood insurance necessity are operating outside their scope.

“I wouldn’t worry about the claims history.” Prior claims on a property are visible to insurers through CLUE reports and affect both eligibility and pricing in ways buyers cannot fully anticipate without professional guidance.

What to Do Instead

The right practice for every one of these situations is the same: refer the buyer to a licensed insurance professional, do so early in the process, and document that you did. Five practices that reduce E&O exposure in insurance conversations: never estimate insurance costs; avoid characterizing any property as “fully insurable”; recommend buyers speak with a licensed insurance professional before making an offer on properties with potential insurability concerns; document insurance referral recommendations in writing; stay within the scope of the real estate license. Per the specialty programs coverage that protects brokerages, your E&O policy covers licensed real estate activities, not insurance advice.

Ready to connect your clients with an insurance partner who can support your transactions without creating risk? The team at Tooher-Ferraris has been helping real estate professionals and their clients since 1932. Contact us today to schedule a conversation.