Homeowners' Association

Insurance for Homeowners' Associations

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Everything You Need to Know About Insurance for Homeowners' Associations

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Everything You Need to Know About Insurance for Homeowners' Associations

A liability claim can have significant financial consequences for both the Homeowners’ Association (VVE) and the individual board members. This is because board members are jointly and severally liable, and in the event of a claim, their personal assets may be subject to recovery.Directors’ and Officers’ Liability Insuranceprotects you as a director of a Homeowners’ Association if you are held liable for errors made while performing your duties. This protection applies even if your personal assets are targeted. It does not matter whether you receive compensation for your work or not.

The insurance is intended for directors and supervisors, whether currently serving, former, or yet to be appointed. In addition, the entire board of directors is covered. The special directors’ liability insurance policy for homeowners’ associations (VVE) is intended for:

all directors and supervisors
legal successors and spouses
chairs of meetings of the Homeowners' Association who perform acts of management on behalf of the Homeowners' Association
persons who perform management functions but who have not been formally appointed as directors under the articles of incorporation
outside directors

If any of the following apply to your homeowners’ association, you are not eligible for the special homeowners’ association policy:

Homeowners' Associations with Negative Equity
Homeowners' Associations without a reserve fund in accordance with Article 5:126(1) of the Dutch Civil Code (every Homeowners' Association must maintain a reserve fund to cover costs other than ordinary annual expenses)
“Dormant” homeowners’ associations in which no board member has been appointed and no periodic maintenance or meetings take place

Homeowners' Associations: Should You Insure Directors' Liability or Not?

In practice, a director may be held personally liable—whether from within or outside the Homeowners’ Association. Due to increased awareness of potential claims and changing laws and regulations, directors face an ever-greater risk of being held liable by third parties, the Homeowners’ Association, or members of the Homeowners’ Association. Here are a few examples:

Roof Replacement During a meeting of the Homeowners’ Association, it was decided to completely replace the roofing. The Homeowners’ Association hired a local roofing contractor without investigating the company’s financial standing. The Homeowners’ Association transferred a large sum of money to the roofing company as a down payment. The roofing company went bankrupt fairly quickly, causing the Homeowners’ Association to lose its down payment. The association intends to hold the board members liable for the financial loss.

Installation of an Electric Gate
It was decided to have an electric gate installed to ensure that the residential complex’s grounds are properly secured. One of the board members of the Homeowners’ Association hired a contractor and commissioned him to install the gate. The contractor incurred significant expenses and had to turn down other jobs as a result. However, it turns out there is not enough money in the association’s account, so the Homeowners’ Association cannot fulfill its contract. As a result, the contractor suffers significant financial loss and will seek compensation from the board members’ personal assets.

To cover the risks a board member faces due to errors made while performing their duties, you can purchase directors’ and officers’ liability insurance for homeowners’ associations.

Directors' and Officers' Liability Insurance Premium

The premiums for directors' and officers' liability insurance depend on the organization for which you are purchasing the insurance and the amount to be insured. Below is an overview of the premiums for the various policies. Prices are for illustrative purposes only.

Estimated Premium for Homeowners' Associations