Insurance payments may be the single largest expense of an association’s budget. Typically, and to over-simplify, the association pays for general liability insurance should someone get injured while on the association’s property. In addition, the association pays for windstorm insurance which covers damages to the common areas should a storm hit and the property is damaged by wind. In addition, the association pays for flood insurance should the common elements be damaged as a result of flooding. Finally, the association also pays for director’s and officer’s liability insurance which insures these people against claims made against them as a result of their service to the community. There may be other policies the association has as well, like worker’s compensation, and even a policy that covers the association for liquor liability issues. The association also better be purchasing insurance for the units that it now owns as a result of foreclosure, before they allow a tenant to reside in the unit.
Despite the fact that the association has all of this insurance, often times when an owner suffers damages to their unit as a result