What is Crime and Fidelity Insurance?
Crime and fidelity insurance is a type of commercial coverage that protects organizations from financial losses caused by fraud, theft, or other dishonest acts committed by trusted individuals and bad actors. This includes people like employees, board members, and third parties with access to funds or financial systems.
While this coverage is used across many industries, Distinguished’s program is tailored specifically for community associations that manage dues, reserve funds, and vendor relationships. For these associations, crime insurance helps protect against risks like embezzlement, forged checks, employee and property manager theft, and fraudulent transfers that can deplete reserves, delay repairs, or disrupt operations.
Plus, this coverage extends to all kinds of people within the association, including volunteers, community managers, management company agents, and temporary and leased employees.
Why Do Community Associations Need Crime Insurance?
Because community associations often handle large amounts of funds collected from residents in the form of dues, assessments, and fees, they will require some form of crime insurance to protect these assets.
Here are common risks this policy helps mitigate:
- Embezzlement: A board member, property manager, or employee diverts funds through unauthorized withdrawals, false payroll entries, or duplicate payments.
- Forgery: Someone forges the signature of an authorized individual to cash checks or approve financial transactions.
- Fraudulent billing: A vendor — real or fake — submits inflated or fictitious invoices for work never performed.
- Theft of property or funds: Association-owned tools, equipment, or banked funds are stolen by someone with physical or digital access.
- Funds transfer fraud: An imposter submits fraudulent wire instructions to move money out of the association’s account.
- Computer crime: Hackers gain access to financial systems to redirect payments or exfiltrate funds electronically.
Considering the reasons mentioned above, every community association must invest in crime and fidelity insurance, even in cases where it is not legally mandated. This insurance provides essential safeguards that contribute to the peace of mind and financial stability of your client’s association.
What Does Distinguished’s Crime Insurance Cover?
Distinguished’s Community Associations Crime Insurance offers both first-party and third-party coverage to protect your clients from a wide range of financial crimes.
Coverage is written on a discovery basis, meaning losses are covered when crimes come to light, even if the actual crime occurred earlier. However, any known or suspected losses prior to coverage are not covered.
First-Party Coverages
First-party coverages protect community associations against fraudulent acts committed by insiders — such as board members, employees, volunteers, or property managers — who have access to the organization’s financial assets.
The core coverage here is Employee Theft, which reimburses the association for losses resulting from embezzlement, unauthorized withdrawals, check fraud, or other misappropriation of funds. This protection is essential for associations where internal actors are responsible for managing dues, reserves, and vendor payments, and where a single point of failure can result in significant financial damage.
Third-Party Coverages
These cover fraudulent acts committed by external perpetrators, including:
- Forgery or Alteration: Covers losses caused by the forgery or unauthorized alteration of checks, drafts, or other financial documents.
- Computer & Funds Transfer Fraud: Covers losses from fraudulent instructions or unauthorized access that result in the transfer of funds through computer systems or banking platforms.
- Money Orders and Counterfeit Money: Covers the acceptance of fraudulent money orders or counterfeit currency in good faith during routine operations.
- Inside the Premises: Covers theft or destruction of money and securities within the insured premises, including damage to the premises from a burglary or attempted burglary.
- Outside the Premises: Covers theft, disappearance, or destruction of money and securities while in transit, such as when being transported by a messenger or armored vehicle.
All coverages are offered on a “cafeteria style” basis, allowing brokers to customize limits and deductibles per insuring agreement. Limits start at $10,000 and go up to $5 million, with deductible options available up to $2 million.
This program is backed by Berkley Insurance Company, rated A+ XV by AM Best, and is available in all states except Illinois.
What Kinds of Community Associations Can Benefit From This Policy?
This program is built for nonprofit residential, commercial, and mixed-use associations responsible for managing dues, reserve funds, and common assets.
Eligible associations include:
- Homeowners Associations (HOAs)
- Condominium Associations (COAs)
- Planned Unit Developments (PUDs)
- Cooperatives (Co-ops)
- Commercial Condominiums
- Mixed-Use Condominiums
If your client’s association handles money, vendors, or reserve funds, they’re exposed to crime risk. This policy helps close that gap.
What Should You Review With Your Clients Before Binding Coverage?
Before binding crime insurance coverage for a community association, it’s important to review a few key policy details that impact eligibility, scope, and claim outcomes. These include the amount of coverage needed, how employees are defined, and whether the policy uses a discovery or sustained loss form.
Confirming the following elements upfront ensures the association is properly protected and avoids coverage gaps:
- Coverage amount: This is the amount needed to protect the financial assets of the association, the monthly dues, and reserve amounts. A good standard is coverage for three months of an association’s operating budget plus any money in its reserve account. However, some states have laws that will require specific coverage amounts.
- Coverage period: This refers to the period within which a covered loss may occur or when a covered loss is discovered.
- How an employee is defined: For an association, this should extend to non-compensated directors and officers, property managers and management companies, and temporary and leased employees. Also, although not a part of the employee definition, it’s important to note that if an employee is known to have been involved in theft or other dishonest acts before coverage is obtained, losses from that particular employee, past or future, are not covered.
- Insurance limits: Does the policy contain an insurance limit that may be applied to one occurrence? If so, how does this work?
- Loss sustained vs. loss discovered: Under the sustained loss form, a loss must occur — and be discovered — during the policy period in order to be covered. Contrast this with the discovery form, which only requires the loss to be discovered during the policy period, no matter when the incident occurred. Since many of these losses occur over a long period of time, the association must purchase a loss-discovered form.
What Are the Benefits of Getting Crime Insurance Through Distinguished?
Selecting the right crime and fidelity insurance for community associations isn’t easy, but Distinguished is here to make it easier. Our comprehensive coverage is designed to provide exceptional protection while offering numerous benefits to insurance brokers and their clients.
Here are the key advantages of choosing Distinguished crime insurance for associations:
- Online submit-quote-bind: Submit applications, quote coverage, and bind policies entirely online using CappApp through our Broker Connect portal.
- Flexible, cafeteria-style coverage: Tailor limits and deductibles for each insuring agreement to match the unique risk profile of each association.
- Wide range of limits: Choose coverage limits from $10,000 up to $5 million.
- Flexible deductibles: Deductibles are flexible, ranging from $500 to $2,000,000.
- Discovery form policy: All policies are written on a discovery basis, offering broader protection for losses that may span months or years before detection.
- Top-tier carrier: Coverage is backed by Berkley Insurance Company, rated A+ XV by AM Best.
- Excess crime options: Available with high deductibles (maximum deductible of $2 million) to sit above primary crime policies when needed.
- No unit cap: There is no cap on the number of units, making it suitable for large associations or those with complex structures.
- Exclusive to nonprofits: Designed specifically for HOAs, COAs, PUDs, co-ops, and similar nonprofit community associations.
- Industry expertise: With over 20 years of experience in providing insurance for community associations, Distinguished’s team of experts has the knowledge and resources to deliver tailored solutions.
- One-stop shop for essentials: Distinguished provides community association insurance essentials like package insurance, umbrella insurance, D&O, and cyber — all in one place.
Register your brokerage today and get a quote for Distinguished crime insurance tailored to meet the unique needs of any community association.
How to Get a Quote From Distinguished
Getting a crime insurance quote is fast and straightforward with Distinguished.
First, register your agency and create your personal login. Once you’re set up, head to the Broker Connect portal to access CappApp, our streamlined online application. From there, you can submit, quote, and bind coverage for most eligible community association products — all in one place.
A CappApp submission can be accepted up to 75 days before the effective date.
Prefer manual submissions? You can still download and complete the Crime paper application, then email it to: [email protected]. Fill in this application for North Carolina, and this application for all other states.
If you have more questions about our Community Associations Crime Insurance, feel free to reach out to our support team at [email protected].
Distinguished’s Crime Insurance FAQs
Where is this program available?
Our crime insurance policy is available to community associations in every state except Illinois.
How can HOAs mitigate crime risks?
The best way for HOAs and other associations to reduce crime risk is by implementing strong internal controls. This includes:
- Segregating duties across financial tasks like deposits, approvals, and reconciliations
- Requiring dual signatures on checks and transfers
- Conducting regular audits and frequent bank reconciliations
- Running background checks on employees and board members
- Establishing a clear code of conduct and fraud prevention training
- Maintaining checks and balances through dispersed authority and regular board elections
