The purpose of insurance to pay for losses that may occur. Self insurance is always an option, although people do not think of it as such.

The first thing you need to do is examine your governing documents. All three HOA I have been involved with have clear specific statements that the Board members as individuals are not liable for actions/decisions as board members. In your case a $40,000 is one time $10 charge/expense per house.

Here is the one set of wording in our current governing documents, "No member of the Board of Directors of the Association or any officer of the Association . . . . shall be personally liable to any owner of any Lot for any mistake of judgment or for any other act or omission of any nature whatsoever, except for any acts or omissions found by a court of competent jurisdiction to constitute gross negligence or fraud."

Second thing to consider - what are the risks? Do you have pools, play grounds, employees (as opposed to contract workers), etc.

I tend to agree 1 M is low, but if you do not have employees or higher risk amenities such as pools and the Board members are not personally liable, it may be unnecessary. 4,000 homes is a large number and even if you suffered a huge loss of $4,000,000 that would only cost home owners $1,000 each. So absent risky amenities and with protective language, I would ask about dropping the policy.

In the event your governing documents do not provide protection for Board members as individuals, then I strongly suggest you resign from the Board. Just one irate home owner could file a suit and you personally. Then you could be personally hiring a lawyer at $500 per hour or more here in Atlanta - that is a risk only fools and the very wealthy typically take.

Gordon
Atlanta