Association coverage

Fidelity Bond & Crime Coverage for Associations

Fidelity coverage protects association funds from theft by board members or the management company, and a broader crime policy adds protection against computer fraud and outside theft on top of that same core protection.

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Fidelity coverage protects the association against theft or embezzlement by board members, officers, and the management company handling its funds, and it is the specific form many lenders expect associations above a certain size to carry by name. A broader crime policy generally includes that same fidelity protection as one insuring agreement, while adding coverage for computer fraud, funds-transfer fraud, forgery, and theft by outside third parties.

What it covers

Fidelity coverage, sometimes bundled inside a broader crime policy, responds when someone entrusted with association funds, a treasurer, board member, or employee of the management company, steals or misappropriates that money. Embezzlement by a treasurer or property manager is one of the most common and most damaging loss types community associations face, which is why this coverage exists as its own line rather than being assumed into property or liability policies.

A full crime policy builds on that same fidelity foundation and adds coverage for computer fraud, funds-transfer fraud, forgery, and theft committed by people outside the association, closing gaps that a standalone fidelity bond typically leaves open.

What it excludes

A standalone fidelity bond generally does not cover a hacked bank account, a spoofed wire transfer, or forged checks presented by an outside party; those scenarios fall to computer fraud or funds-transfer fraud coverage found in a broader crime policy instead. Neither form covers accounting errors or honest mistakes, since the coverage is specifically built around dishonest acts.

Coverage also typically does not apply automatically to the management company's employees unless the policy specifically names the managing agent as a covered party, which is one of the most commonly missed details in association crime coverage.

Who requires it

Secondary-market guidelines from mortgage investors generally expect associations above a certain size, sized relative to total assessments and reserves rather than a fixed unit count, to carry fidelity coverage protecting against theft by anyone who handles association funds, including the management company. Lender documentation, condo questionnaires, and project review often call for this coverage by name as a condition of financing eligibility for units in the building.

Management companies also typically require that fidelity or crime coverage name them specifically as a covered party before they'll handle an association's accounts, since their own exposure is tied to how the association's funds are protected.

How limits are chosen

Limits should be sized to the largest sum of money the association could plausibly have in a single account plus a reserve balance at any point in the year, not a token amount carried forward from a prior renewal. A large special-assessment collection sitting temporarily in an association account can meaningfully increase the sum at risk, which is a reason to review limits before, not after, a big collection cycle.

Boards should also confirm the policy matches whatever specific language a lender's documentation uses, since some reference fidelity bond coverage by name even when a broader crime policy would satisfy the same underlying requirement.

Illustrative claim scenario

A departing treasurer's unauthorized transfers

An association's volunteer treasurer makes a series of unauthorized transfers from the reserve account over several months before resigning. The association's fidelity coverage, which specifically named the treasurer as a covered insured, reimburses the lost reserve funds after the board discovers the discrepancy during its next audit, allowing the reserve to be restored without a special assessment.

Frequently asked questions

Not exactly. A fidelity bond is the narrower, specific form covering insider dishonesty that many lenders require by name, while a crime policy is a broader package that typically includes that same fidelity protection plus coverage for computer fraud, forgery, and outside theft.

Not automatically. The policy typically needs to specifically name the management company and its employees as covered parties, which is worth confirming directly rather than assuming.

Generally not under a standalone fidelity bond; that scenario is more likely addressed under computer fraud or funds-transfer fraud coverage found in a broader crime policy.

Related association coverage

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