HOA Contract

• When homeowners join an HOA, they sign an existing HOA contract, one that specifies the rules by which they must conduct themselves while a member of the association. This contract will usually require that the member pay a certain amount of fees on a regular basis. These fees may be put to various uses, including the purchasing of insurance for the HOA. in addition, the member may have to buy his own homeowner's insurance.
  
  

Insurance

• If an HOA buys insurance, then the contract will specify exactly what type of insurance it should buy and the procedure by which the association decides upon the specific policy. In some cases, the HOA may wish to switch insurance policies as a means of better addressing HOA needs. When this happens, the HOA will need to make sure it follows contract procedure or the action can be legally challenged.
  
  

Deductible

• In some cases, the HOA may wish to save money by switching from a policy with a high premium and relatively low deductible to a policy with a lower premium -- which translates to lower monthly fees from HOA members -- and a higher deductible. This is entirely legal, so long as the HOA receives the required number of votes to pass the motion needed to change insurance policies.
  
  

Considerations

• If an HOA requires that a person buy his own insurance -- some HOAs, for example, require all members to own and maintain homeowner's insurance -- then the HOA will generally state the requirement in the form of an amount of insurance coverage. For example, the HOA may require the person to hold $500,000 worth of coverage. Generally, the HOA will leave it to the discretion of the homeowners to decide the size of their deductible.