Are you curious if what is fidelity bond insurance for condos? Most condo or homeowner association members are locals. The safety and well-being of their family, friends, and neighbors is their priority.
Being on the board of directors comes with a lot of power, which you may exploit. More specifically, many dishonest members in condo organizations regularly perpetrate fraud and theft of association cash.
As a result, firms purchase fidelity bond insurance to safeguard themselves against financial loss. This is the only way for condo organizations to protect themselves against any employee dishonesty.
What Is Fidelity Bond Insurance In Terms Of Condos?
So, what is fidelity bond insurance for condos? This type of insurance provides a fidelity bond to protect the insured from the fraudulent acts of third parties. For example, associations commonly get insurance to cover losses caused by dishonesty on their workers, board members, or authorities.
Who Is The Fidelity Bond Designed To Protect?
Fidelity bonds do not cover unpaid volunteers since they are not considered current employees. Boards and committees of homeowners’ organizations and condominium complexes are generally made up of unpaid volunteers rather than paid staff.
How Much Does A Fidelity Bond Cost?
The cost of your fidelity bond varies depending on the bond amount and the number of people covered. A policy’s risk increases as the number of bonds and members increases. The insurance is quite affordable as compared to the bond’s total value. Keep in mind how many people are covered by the insurance and have the required money on hand. Your state legislature or your association’s laws will provide information on bond minimum requirements.
When A Conflict Arises, How Long Does It Take To Resolve It?
If someone claims your bond, the insurance company will look into it. If a claim is genuine, they will cover the whole bond amount. Keep in mind that most insurance policies only payout if the employee is not found to be at fault.
This means the insurance company will not pay out unless you have a spotless police record. Because the convicted criminal is usually a close friend or family member, the plan holder has little incentive to help the authorities.
Since a Fidelity Bond typically does not include a conviction clause, You have to ensure that your insurance is appropriate for your current situation before purchasing one.
The Benefits And Drawbacks Of Fidelity Bonds For Condo Associations
Members of a condominium association’s board of directors may get along and even become close friends. Still, if they work together closely, there will always be an opportunity for dispute and conflict. Trust bonds and condo association fidelity bond insurance are essential to the overall security of condo associations, no matter how friendly and close-knit they are. Here are security options for your HOA.
Some of the condominium association’s board members may likely try to profit from their positions. Either via the use of stolen money, which happens considerably more frequently than you may think, or through some other method. You may want to read when car is stolen how does insurance cover it.
How To Avoid Financial Calamity?
To understand how condominium associations may protect themselves from financial calamity by purchasing comprehensive condo association fidelity insurance, follow these simple steps:
#1. Detection and investigation of financial abuse
Embezzlement instances involving homeowners associations and condominiums have previously made headlines. Yet, for every one reported, two or three scams involving $4 million go unnoticed. Condo associations may guard against these conflicts in several ways, all of which keep board members honest and responsible while maintaining procedures open and transparent.
The money of a condominium association should be handled by more than one person, and two people should sign all checks. A monthly expenditure reconciliation committee established by the board of directors may also be useful.
Anyone who notices any inconsistencies is encouraged to inform us so that we may look into them further. Also, don’t forget to inquire about condo association fidelity insurance. You may want to know how to become an insurance investigator.
#2. Condominium organizations should get insurance to cover financial assets
It will compensate the condo association if one of its employees steals or embezzles funds. In addition, a policy outlines a board’s authority to establish expenditure restrictions. Considering this type of protection every year becomes increasingly crucial as funds change from year to year. In addition, condo associations should check with their insurance carriers to see whether they provide fidelity coverage if they don’t have a master policy.
Naturally, no two policies are identical. You should be aware of any provisions that may be contained in this insurance policy. To begin with, employee theft is not considered embezzlement in the eyes of the law. Employees who steal will only be protected if the insurance policy in question has an endorsement attached to it.
The loss must be connected to the theft, demonstrating that the perpetrator(s) committed the crime with malice. To be clear, the policy will not apply if the money was stolen by mistake or omission rather than on intent.
It’s A Wrap!
Since you already know what is fidelity bond insurance for condos, you have to make sure you are covered for everything in your insurance coverage. Although cash is safe, assets such as real estate and other financial instruments are not. You may want to read about how to deal with an insurance claims adjuster and how much do insurance adjusters make in Texas?