The Importance of Crime Insurance

The Board of Directors is charged with helping an association run smoothly and efficiently, but are you prepared when one or more of those members engage in thievery?

According to this recent news report, a Woodstock man embezzled more than $130,000 while serving as treasurer at the condominium. The dishonest treasurer drained the condo account of $21,000, which was supposed to be used for future renovations and repairs. As part of his position, the treasurer was also given a debit card, but instead of using it for association matters; he used it for his own personal use buying liquor, gas, groceries, sports tickets, and Christmas presents all to the tune of $25,000.

When accounts get drained and there is no money available, the people who shoulder the cost are the unit owners of the association. They get charged with an assessment to make up the lost funds leaving many unit owners disgruntled. Purchasing crime insurance helps you avoid this situation altogether by helping you recoup the money that you lost. When you file a claim, your insurance company will pay out the amount that you need to recoup providing it’s a covered loss.

How to Avoid Embezzlement

Of course, it’s easier to avoid sticky situations in the first place. Investing in a CPA firm to perform annual comprehensive audits will show you where funds are being placed year after year. Requiring countersignatures on checks, and having separate individuals reconciling bank statements from those depositing funds will help you keep tabs on financials and curtail sticky fingers. Requiring background checks beyond the cursory criminal conviction history is also important. A credit check would be an appropriate requirement for any position handling funds, such as the treasurer.

Crime Insurance: How Much Should An Association Have?

This can depend on state laws and what the association’s by-laws dictate in the governing documents. Oftentimes, the association will want the Fair Housing Act approved for lending purposes, which will require the association to carry crime insurance. In that situation, the mortgage company will stipulate how much insurance is required, but even then, that may not be enough. The responsibility to secure crime insurance generally rests on the board of directors. They should know who is covered and what types of crimes are covered under the association’s policy.

When Should I Update My Crime Insurance Policy?

Whenever there is a significant change in association assets, such as increased fees or adding additional units to the master policy, it’s important to update your crime insurance policy. If no major changes have been made, do an annual checkup just to make sure you have proper coverage in place.

Do you need to update your crime insurance policy or purchase one for the association? Give Brian Kilcoyne from H&K Insurance a call at 617-612-6515 to discuss your options today!