Distinguished’s Guide to Crime and Fidelity Insurance for HOAs, COAs, and More

A strong sense of community, friendly neighbors, and well-maintained surroundings are just a few of the many reasons people love living in community associations. However, even in these seemingly ideal settings, crime and financial loss can still be a concern for HOAs and COAs. 

That’s where community association crime and fidelity insurance comes in. This comprehensive coverage offers protection against a range of financial criminal activities, including fraud, dishonesty, forgery, and more. 

In this article, we’ll break down the basics of community association crime and fidelity insurance, what it is, and why your clients need it. Plus, we’ll give you an inside scoop on Distinguished’s Community Associations Crime Insurance, so you can confidently find the perfect policy that keeps your client’s association secure and well-protected.

What is Crime and Fidelity Insurance?

Crime and fidelity coverage protects associations against financial crimes. This insurance is designed to cover financial losses due to dishonest acts by employees, board members, or other trusted individuals within the association, including third-party perpetrators not employed or associated with the association.

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 just a few ways COAs benefit from a comprehensive crime and fidelity insurance policy:

• Embezzlement protection: An employee embezzles money from the association’s bank account by writing unauthorized checks or making withdrawals.
• Forgery protection: An employee forges the signature of a board member or other authorized person on a check or other document to steal money from the association.
• Fraud protection: An employee commits fraud by submitting false or inflated invoices for goods or services that were never provided or by inflating the cost of goods or services that were provided.
• Theft protection: An employee steals physical property from the association, such as tools, equipment, or supplies.
• Misappropriation of funds protection: An employee misappropriates funds from the association by using them for personal expenses.
• Fidelity bond requirements: Many states require community associations to maintain a fidelity bond, which is a type of insurance that covers the association against losses due to dishonest acts by its employees or board members. Crime insurance can fulfill this requirement and provide coverage for such losses.
• Safeguard for reserve funds: Community associations typically maintain reserve funds for future repairs, maintenance, and capital improvements. Crime insurance helps protect these funds from potential losses due to fraud or theft.
• Credibility and trust enhancement: Having crime insurance in place demonstrates to residents that the association takes its fiduciary responsibilities seriously and is committed to protecting the community’s financial assets. This can help build trust and confidence among the residents.

Considering the reasons mentioned above, it is crucial for every community association to 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.

How Can HOAs Mitigate Crime Risks?

In order for associations to help mitigate these types of losses and reduce exposures, they need to implement strong internal controls. This involves, among other things:

• Internal audits: Regular internal audits help identify discrepancies or irregularities in the association’s financial records, ensuring transparency and early detection of potential fraud.
• Dual signatures: Requiring dual signatures on checks or other financial transactions provides additional oversight, reducing the risk of unauthorized or fraudulent activities.
• Regular elections: Holding regular elections for board positions promotes accountability, diversity of thought, and a system of checks and balances within the association’s management.
• Disperse authority: Distributing authority and responsibilities among multiple individuals prevents the concentration of power in one person’s hands, minimizing the risk of financial mismanagement or abuse.
• Conduct Background Checks: Ensures all employees have a clean financial and legal history.
• Employee Code of Conduct: Creates clear expectations about what is acceptable behavior for employees.
• Segregate Duties: Help prevent fraud and misuse of funds because no one person has complete control over a transaction.
• Regular Reconciliation: Reconciling bank accounts frequently makes it more difficult for fraud to occur or go undetected. 
• Monitor Spending: Regular audits help detect and prevent misuse of association funds.
• Fraud and Theft Prevention Training: Equips employees with the knowledge they need to prevent crime in the first place.

In addition to implementing strong internal controls, a community association needs to have the proper insurance program in place. You can help ensure they get the right coverage by confirming the following points: 

• Coverage amount: The amount needed to protect the financial assets of the association – the monthly dues and reserve amounts.
• Coverage period: 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: If the policy contains an insurance limit that may be applied to one occurrence and how this works.
• 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, it is important the association purchase a loss-discovered form. 

If your clients are looking for more tips, feel free to send them our Crime Risk Management Checklist. 

What Does Distinguished’s Crime Insurance Cover?

Distinguished’s Community Association Crime Insurance includes First-party coverage and Third-party coverage. This means that your client will be covered for:

• Employee Theft: Protects the organization against financial losses resulting from dishonest acts by employees, such as theft, embezzlement, or misappropriation of funds or property.
• Forgery or Alteration: Covers losses from forgery or alteration of items like checks or drafts made by unauthorized individuals or entities.
• Inside the Premises – Theft of Money & Securities: Offers protection against theft or destruction of money and securities within the insured premises.
• Inside the Premises – Robbery or Safe Burglary of Other Property: Covers damage to the premises or its contents due to a burglary or attempted burglary.
• Outside the Premises: Safeguards the organization against losses resulting from theft, disappearance, or destruction of money and securities while being transported outside the insured premises, typically by a messenger or armored vehicle service.
• Computer & Funds Transfers Fraud: Covers losses incurred due to computer fraud, such as unauthorized access, data breaches, or the fraudulent transfer of funds through computer systems or networks. As well as, protects the organization against losses resulting from the unauthorized transfer of funds from its accounts, usually due to fraudulent instructions provided to a financial institution by an imposter.
• Money Orders & Counterfeit Money: Offers protection against losses stemming from the acceptance of fraudulent money orders or counterfeit paper currency in good faith during business operations.

It’s also important to note that Distinguished’s crime insurance policy is written on a discovery basis rather than a loss-sustained basis. This means that coverage is triggered when the crime is discovered, regardless of when the actual loss occurred. 

This discovery-based approach provides greater flexibility and protection for policyholders, as it covers losses discovered during the policy period, even if the dishonest act took place prior to the policy’s inception.

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 Convenience: Our user-friendly online platform streamlines the process of obtaining coverage, making it seamless and efficient for insurance brokers.
• 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.
• Limit and Deductible Options: Distinguished offers a vast number of limit and deductible options to accommodate associations of various sizes and risk profiles.
• New Business Discount: Eligible new business crime submissions can receive a discount when D&O coverage is also written with Distinguished.
• One-stop-shop for Essentials: Distinguished provides community association insurance essentials like package insurance, umbrella insurance, D&O, and Cyber—all in one place.
• Excess Crime Coverage: Our policy offers various deductible levels, including high-deductible options, allowing it to sit above another crime policy for enhanced protection.

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

The first step in getting a crime insurance quote is to register with Distinguished. To do this, simply register your agency and then create a personal login for yourself. 

With that complete, access our online portal and submit your business. We’ll get back to you with a quote as quickly as we can.

Have more questions about our Community Association Crime Insurance? Feel free to reach out to our support team or our community association insurance team at communityassociation@distinguished.com.

Distinguished’s Crime Insurance FAQs

Where is it available? 

Our crime insurance policy is available to community associations in all states except Illinois. 

What are the limits available? 

Limits start at $10,000 and can be increased up to $5 million depending on your client’s needs. 

Who is the carrier? 

Our crime insurance is backed by Berkley Insurance, A.M Best Rating A+ XV carrier.

Who do I contact if I have questions? 

You can contact us anytime at the following email address: communityassociation@distinguished.com

About Distinguished Programs

Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Surety, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.

View a full list of our programs and submit business with Distinguished.

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