If you own a home in a planned development or you own a condo, then you likely pay homeowners association dues. Every year. Usually at the worst time. What do you get for those dues? For one thing, insurance. As distasteful as those dues can be, the end product can be really beneficial in case something bad happens in your development and condo.

Ever wondered how the grass gets mowed between buildings at your condo or townhouse or around the park in your development? Or how the flowers get planted? Or who cleans and maintains the sidewalks? Spoiler alert: It's your homeowners association. That takes a big bite out of the fees you pay – just keeping things nice.

They also can be used to operate and maintain a swimming pool, clubhouse, gym or other amenities on the property. Most HOAs schedule regular pest control. In some developments, mostly condos, they can cover garbage pickup and maybe some utilities.

But one of the most important uses of HOA dues is insurance for the housing or condo development.

What does HOA insurance cover?

Homeowners association insurance typically includes four components – some of which will be more important to you than others. Here's the rundown on the four components and how they can affect you and your family (and its finances):

Property insurance

If you're a condo owner, this is super important – it's what covers the structure of your building from fire, theft, wind and other specified perils. It's up to you, however, to insure the contents of the condo or townhouse.

In a housing development, HOA property insurance would cover property such as clubhouses from those same perils.

How does this affect you? If your HOA doesn't have property insurance – or doesn't have enough, it can levy a special assessment against residents in the development to pay for repairs.

Liability insurance

Again, this is a major component of an HOA insurance policy. It helps when there are accidents or injuries that occur on common property. For example, if playground equipment breaks and isn't repaired, resulting in a child getting hurt, it could help defend the association in a lawsuit and pay any award in the case, up to the policy limit.

How would this affect you? If your HOA doesn't have coverage or enough coverage, it again could levy an assessment to pay for the legal costs and award.

Directors and officers coverage

This coverage protects the association's officers and other officials from lawsuits they might face while performing their duties. This could include actions such as filing complaints or even foreclosure against a home or condo owner.

This might not seem like it affects you, but again, there is a chance that a special assessment could be coming your way should the lawsuit get out of control.

Employee dishonesty

This protection helps in case of theft by the association's employees or volunteers, management companies or contractors. This affects you because it is your money that's being protected.

In addition to the above, your HOA might have an umbrella policy – extra liability coverage for unpredictable things that happen. It's a relatively inexpensive way to guard against those special assessments that could happen in the event of losing a big-money lawsuit.

How can the association save on premiums?

The case for homeowners association insurance is pretty compelling, but that doesn't mean you can't question how much your association spends. In many cases, it may be possible to save on premiums, which could result in no yearly increases and maybe even a reduction.

How? Request that the association shop its coverage each year to see whether it can get a better deal on coverage. Loyalty is great in many instances, but maybe not when it comes to insurance premiums.

Remember, it's in your best interest for the development that includes your home to remain safe and solvent. Homeowners association insurance can keep things on track when there's an accident or disaster and keep you and your family protected from harm.

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