Most community associations carry enough liability insurance to meet the minimum requirements set by the Davis-Stirling Act. Some associations carry a bit more if they have an exposure such as a swimming pool. Many, though, don’t have much more than $5 million total. So what happens if the association is sued for more than that – and loses the lawsuit?

Recently, a community association was hit with a $20 million ruling in Nevada after a serious playground accident. While the ruling is under appeal, the association did not carry anywhere close to that amount in liability insurance. The homeowners are now afraid that they will have to make up the difference, which would be a significant amount per-unit.

In the aftermath of this $20 million ruling, many boards of directors are taking a closer look at high-limit umbrella policies. Umbrella policies kick in when the limit for the general liability policy has been reached by a claim. Premiums for umbrella policies are usually lower than those for high limit general liability policies. They also often provide coverage in excess of the Directors & Officers policy, making them even more cost effective.

When discussing insurance, consider a $15 – $25 million umbrella policy for your community. It is probably less expensive than you think and can provide peace of mind in the event the unthinkable happens.