Communities should obtain adequate Oregon HOA insurance for financial protection. Insurance is not only a requirement under state law, but also integral to the long-term success of any association.
The Importance of Oregon HOA Insurance
Insurance is an association’s first line of defense against liability, property damage, and emergencies. It acts as a buffer, shielding the association from financial losses and preventing the need for more drastic measures.
Without sufficient Oregon homeowners association insurance, boards can face a number of problems. When property damage occurs due to a storm, the association would have to pay for the repairs out of pocket. The same goes for when someone trips and injures themselves on HOA property.
Insurance allows associations to cover their bases. In the event of a financial loss, adequate coverage can pay for the costs. On the other hand, without insurance, boards would need to raise dues, levy special assessments, drain their reserves, or take out a loan just to keep up with expenses.
Oregon HOA Insurance Requirements
Two factors determine insurance requirements for community associations: state laws and the governing documents.
State Laws
In Oregon, both ORS 94.675 (for planned communities) and ORS 100.435 (for condominiums) require adequate insurance coverage. Under these laws, associations must obtain property and liability insurance.
The Oregon Planned Communities Act also states that the governing documents may specify a deductible for the policy. This amount must be added to the policy’s face amount when determining whether the insurance is equal to the full replacement cost, at a minimum.
That said, the board may vote to obtain a higher deductible than specified, but it may not exceed:
- The Federal National Mortgage Association’s maximum acceptable deductible, or
- $10,000.
If the board does vote to exceed the deductible specified in the governing documents, it must notify all homeowners no later than 10 days after the decision.
According to ORS 94.680 (for planned communities), if the governing documents give the HOA the power to decide whether to repair or rebuild a unit after damage, then it must carry a blanket all-risk insurance policy. This policy should cover the full cost of replacing every building in the community. Owners will then pay for the policy through regular dues.
Furthermore, if an association has this rule, the governing documents must include the following:
- Clear rules or limits on how damaged buildings must be repaired or rebuilt.
- A deadline for when repairs or reconstruction must begin.
- What the board must do if repairs never happen or if the insurance payout doesn’t match the actual cost.
Governing Documents
In addition to state laws, board members must also comply with the requirements set forth in their governing documents. If the CC&Rs or bylaws require additional types of insurance outside of the three described under Oregon law, boards must purchase them.
Essential Types of Oregon HOA Insurance
Insurance is a blanket term for policies that protect against financial loss, but there are different kinds available. Here are the types of Oregon HOA insurance every community must have.
1. HOA Master Policy
A master policy has two layers: property damage coverage and liability coverage. This policy protects all common areas and association-owned properties. These include clubhouses, pools, sidewalks, elevators, and more.
For protection against physical damage, the association receives coverage for repairs or replacement, depending on the limit. It protects against perils such as fire, wind, and hail. That said, every policy is different, so not all risks may be covered.
Liability coverage is another critical component of this policy. It protects the association and its members from lawsuits arising from bodily injuries in common areas. If a guest trips on a sidewalk and hurts themselves, for example, this policy can step in.
2. Fidelity Bond
Also known as crime insurance, this protects the association against financial losses resulting from dishonest acts, such as theft or fraud. The acts must have been committed by board members, employees, or contractors who handle the association’s finances.
3. Directors and Officers (D&O) Insurance
Board members or officers act as the decision-makers of the community. If someone sues one or all of them for a decision they made while serving on the board, D&O insurance can cover them.
4. Workers’ Compensation
If an association employs workers (even part-time ones), it must have sufficient workers’ compensation. This policy covers medical expenses and lost wages if a worker gets injured while on the job.
5. Umbrella Liability Insurance
For larger associations, it is imperative to obtain umbrella liability coverage. This policy supplements both the general liability coverage under the master policy and D&O insurance. It adds an extra layer of financial protection.
6. Other Specific Policies
More often than not, property insurance or master policies don’t cover perils such as floods or earthquakes. For property damage resulting from these risks, the association would have to take out separate policies.
Types of Condominium Association Insurance
While condo associations must also have the above policies, boards often find themselves confused between the types of master policies. There are three: bare walls-in, single entity coverage, and all-inclusive.
Bare Walls-In
The bare walls-in policy only covers the building’s basic structure. This includes the exterior walls, roof, framing, and shared utility systems. Owners are responsible for everything inside their units, including interior walls, flooring, fixtures, and appliances.
Single Entity Coverage
A bit more comprehensive than bare walls-in coverage, this policy covers the building structure and the original fixtures and appliances inside the units. These are the fixtures and appliances that came with the units (developer-installed). That said, any upgrades or improvements the owner made aren’t covered under this policy.
All-Inclusive
This is the most comprehensive of the three policies. The all-inclusive policy covers the building’s structure, common areas, and almost all the fixtures, installations, and improvements inside individual units. This includes both original and upgraded fixtures and appliances.
Reminding Owners to Obtain Individual Policies
While Oregon HOA insurance offers financial protection, it is often limited to the association and its properties. Homeowners in single-family communities must obtain their own insurance policies. This is because HOA policies typically apply only to the association, not to individual homes.
As for condominiums, unit owners must first understand what type of master policy their association carries. Bare walls and single entity coverage offer limited protection, whereas all-inclusive coverage is more comprehensive. That said, even all-inclusive policies don’t cover personal belongings or liability, so unit owners must still purchase their own.
More Than Minimum
Clearly, Oregon HOA insurance plays an essential role in the long-term financial stability of any community. While meeting the bare minimum to comply with statutory requirements, board members should consider their association’s needs and act accordingly. Sometimes, a master policy and fidelity insurance aren’t enough.
CWD Group helps community associations navigate insurance requirements and manage coverage. Call us today at 503-488-2008 or contact us online to learn more!
