Acts of dishonesty a Fidelity Bond may cover:
- Check Fraud
- Computer Fraud
- Invoice Padding
- Wire Fraud
Homeowner and condo associations are usually made up of members of the community. They are your neighbors and friends looking out for the best interests of every resident. However, the power associated with being a board member has the potential to be abused.
Acts of dishonesty, such as fraud and embezzlement of association funds, are unfortunately common within HOAs and condo associations. For this reason, associations purchase Fidelity Bonds to serve as protection against loss.
A Fidelity Bond is an insurance policy designed to protect the principal, in this case, the association, against bearing financial losses due to theft or fraud by members within the association. There are different types of Fidelity Bonds with different clauses, so be sure to get a policy that meets your association’s needs.
Acts of dishonesty a Fidelity Bond may cover:
A Fidelity Bond is vital to ensure an HOA or Condo Association doesn’t suffer from internal theft and fraud.
When determining the bond amount for your coverage, there are a few variables to consider.
For example; Does your state require a Fidelity Bond?
Some states, such as California and Florida, require HOAs have a Fidelity Bond with a bond amount equaling the total available funds. Your bond amount could be greater if your HOA’s governing documents require a larger bond amount.
Another factor is the number of individuals who have access to the funds to be included in the policy. If you’re unsure of the minimum bond requirement for your association, the best way to find out is to review your state’s legislature and your association’s rules.
The cost of your Fidelity Bond depends on the bond amount and number of individuals to be included in the coverage. The higher the bond amount and number of members means more risk is associated with the policy. However, the cost of the coverage is relatively inexpensive when compared to the full amount of the bond.
Our Fidelity Bonds start at $100. When requesting a quote for a Fidelity Bond, make sure your policy includes all the coverage you need to be in compliance with the state and/or your association.
Also, don’t overpay for your policy by including coverage you don’t need. Keep your costs down by excluding coverage not applicable to your association.
Fidelity Bonds typically only cover current employees, not unpaid volunteers. However, HOA and condo association members of the board and committee are often made up of unpaid volunteers.
When shopping for your Fidelity Bond, you may want your policy to cover current and previous employees, including volunteers, accountants and community managers. If you have any questions about selecting the coverage that best suits your needs, send us a message, email us at firstname.lastname@example.org or call to speak with a client service agent at (866) 722-9239.
The surety company that issued your bond will perform an investigation if a claim is made on your policy. When a claim is found to be valid, the surety will payout on the policy up to the full bond amount. However, please note most policies only payout if the employee is convicted of the crime.
This means a report must be filed with the police to receive a payout on the policy. Often, the convicted individual is a close friend or relative, making police involvement difficult for the plan holder. A conviction clause is not always associated with a Fidelity Bond, so review your options for coverage to ensure your policy fits your situation.
This may not be an issue if cash is rarely handled by your association. But, if cash receipts are frequently used; create policies for regular cash counts and registers used for bank deposits.
Implement additional procedures if managers or treasurers receive cash to deliver to the bank.
Ideally, your association should require checks or money orders in place of cash.
Requiring multiple signatures for every check coming in is an inconvenience. However, by enforcing at least 2 signatures for payments, the association’s risk of fraud occurring significantly drops. Having at least 2 parties verify the collection of payment is more secure than just 1 individual.
If you have a bookkeeper or management company involved with signing checks for bills; make a discreet list of items they have authority to approve. When a large amount of money is a factor, a specific account for payments made by management should be implemented. All other accounts should be exclusive to board member signatures.
Contact your bank to set up a lockbox service to store assessments. By doing so, payments from homeowners are sent directly to the bank via mail.
Then, these payments are deposited into the HOA bank account; preventing the involvement of more hands in the process. Ultimately, this means there is less risk of a member misusing or taking the funds.
Our Surety Solutions, A Gallagher Company team looks forward to assisting you with getting your Fidelity Bond. By partnering with top surety companies, we’re able to provide competitive bond quotes. And as important as finding a great deal on your bond is, finding a policy that meets your needs without having to pay for coverage you don’t need is just as important.
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