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Homeowner Associations » Crime / Fidelity

Risk Prevention: How Much Coverage Is Enough?

Boards should be advised to review their governing documents to determine how much coverage they are required to maintain. Many homeowners associations endevavor to meet the minimum requirements of the institutional lenders, such as FannieMae or Freddie Mac. Please see the following example: Fidelity Insurance For Condominiums.

FannieMae, requires a bond equal to three months operating expenses PLUS reserves. Most boards are interpreting this requirement as three months gross homeowners dues plus the current Reserve balance.

No homeowners association can eliminate the risks associated with fraudulent employee, fellow board member or management agent, but by maintaining the proper insurance and a risk prevention system, exposure can be minimized and the chances for major financial losses reduced.

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