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Help For Board Members – Understanding Crime and Fidelity Insurance

By July 10, 2017May 21st, 2020Insurance

Crime & Fidelity Insurance

While nearly all HOAs have some type of policies on the books, many HOA boards have little or no idea what type of insurance they have or need. This can potentially lead to expensive litigation and claims that can cost your homeowners association thousands, and sometimes even millions of dollars.
There are certain types of insurance your homeowners association should have including: building/property insurance, general liability insurance, director’s and officer’s insurance, workers compensation coverage, and fidelity insurance. This is written to be bring some clarity to crime and fidelity insurance.
What is Crime and Fidelity Insurance?
Crime and Fidelity Insurance protects the actual money the Association has in the operating account and reserve accounts. Crime and Fidelity Insurance protects the money from embezzling, check fraud, invoice padding or false invoices, computer fraud and wire fraud.
What is the difference between Crime and Fidelity and Employee Dishonesty?
The difference is in the definition of “Who” is covered.  Employee Dishonesty is similar to a Crime Bond.  Both cover money being stolen, but most Employee Dishonesty insurance and bonds will only cover the employees.  The employees of a non-profit HOA are the board members.  Crime and Fidelity covers the following:

  • present, past and future board members
  • committee members
  • volunteers
  • spouses
  • accountants or bookkeepers
  • community managers

Employee Dishonesty Insurance and Bonds usually cover money stolen by an employee.  Crime and Fidelity Insurance will cover the four main types of stealing from an Association which are taking of the actual money, Check Fraud, Wire Fraud and Computer Fraud.  3rd party crimes, meaning, the person taking money is not affiliated with the association, would also need to be covered.  Each policy will have different limits and deductibles.
HOA board members typically aren’t insurance experts. In fact, insurance and knowing exactly what your Association needs can be difficult to understand. That’s why it’s crucial you consult and get counsel from a licensed insurance agent, or agents, to help put your insurance plan in place. 
It’s also important to read through the Association’s governing documents to look for specific insurance requirements of your Association. Also make sure your HOA is meeting all the necessary requirements by examining the state statutes and determining the local, state or federal laws that apply.