Risk Management

Risk Management is the process of making and carrying out decisions that minimize the adverse effects of accidental losses. It involves five steps:

  1. Identifying exposures to loss
  2. Examining alternative techniques
  3. Selecting the best techniques
  4. Implementing the chosen techniques
  5. Monitoring and improving the risk management program

The risk management process begins when the association identifies exposures to loss in four areas: property, liability, net income, and personnel.  At this point, the association selects, implements, and monitors a risk-financing plan.  The purchase of commercial insurance, although very important, is only one part of that process.

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One risk financing technique is risk transfer by means of commercial insurance coverage.  This transfer of risk financing begins with the development of an insurance request for proposal that includes an association fact sheet and bid specifications.

Common Insurance Coverages for Community Associations

  • Property Coverages
    • Other Exposures:
      • Fidelity
      • Bailee
      • Environmental
      • Flood
      • Inland Marine
      • Mechanical Breakdown (also known as Boiler & Machinery)
      • Vehicle
  • Liability Coverages
    • Commercial General Liability (CGL)
    • Directors' and Officers' Liability
    • Other Exposures:
      • Umbrella
      • Environmental
      • Vehicle
  • Net Income Coverages
    • Net Income typically is covered in a section of the CPP that supplements the property coverage section
  • Personnel Coverages
    • Workers' Compensation, including Employer's Liability
    • Other Exposures
      • Employment Practices Liability