Crime and fidelity insurance for townhome associations
Reimburses a townhome association for stolen funds, but whether the bond is a warrantability requirement turns on one recorded fact: condominium-form or PUD-form.
Why Coverwatch
- Markets
- Community-association programs that write the townhome bond on the recorded model, endorse it to reach the managing agent, and add computer and funds-transfer fraud at parity.
- Competition
- 60+ markets compared on whether the bond meets the Fannie Mae condominium warrantability floor, not just premium, so a condo-recorded townhome clears its lender check.
- Endorsements
- We size the bond to three months of assessments plus reserves. It reaches the management company, and funds-transfer fraud is scheduled at the fidelity limit.
For hoa
- What it covers
- Association funds stolen by a board member, employee, or management company. Also the fidelity bond a condominium-recorded townhome over 20 units must carry to stay warrantable.
- What it doesn't
- A board mismanagement suit, damage to the buildings, and a resident injury, which sit on other lines, not the crime bond.
Trusted by 60+ carrier partners
Does a townhome association need a fidelity bond, and how does the recorded form decide it?
A townhome association fidelity bond is required only when the project is recorded as a condominium over 20 units, under Fannie Mae B7-4-02. A PUD-recorded townhome is exempt from that mandate. Two identical-looking rows carry opposite fidelity obligations depending on how the plat and CC&Rs were recorded.
Why townhome fidelity requirements depend on the recorded form
Townhome is an architectural style, not a legal form. The association is recorded one of two ways.
Condominium-recorded townhomes carry the mandate
Fannie Mae requires fidelity coverage for condominium and co-op projects over 20 units.
PUD-recorded townhomes are exempt
A fee-simple PUD is not a condominium or co-op, so Fannie Mae's fidelity requirement does not reach it.
You read the form from the plat, not the roofline
The recorded declaration, plat, and CC&Rs state whether owners hold airspace or fee-simple lots.
How we get you covered
We take crime & fidelity for hoa to 60+ markets, build it to fit your contracts, and keep your certificates compliant.
Read your risk
We map what could actually go wrong in your operation, where a claim would come from, and who would bring it.
Shop 60+ markets
We take your risk to the carriers that know your class and make them compete on price and terms.
Build the endorsements
We add the endorsement wording that decides whether the policy responds to a claim, beyond the base form.
Keep you compliant
We handle the COIs, additional-insured certs, and renewals, so you are never the one chasing paperwork.
What's covered, and what isn't
In the policy
Employee and board-member theft of association funds
The core ISO employee-theft agreement reimburses the association when a treasurer, officer, or paid employee steals from the operating or reserve accounts.
Management-company dishonesty on a townhome account
When a CAM firm handles the association's funds, the bond has to be endorsed to reach the manager.
Computer fraud and funds-transfer fraud
Added by the ISO computer-and-funds-transfer agreement, this pays when a thief moves association money electronically or sends a fraudulent instruction to the…
Forgery, alteration, and embezzlement of reserves
Reimburses the association when someone forges or alters a check on its accounts, or embezzles reserve funds.
The bond a condominium-recorded townhome must carry
On a condominium-recorded townhome over 20 units, the fidelity bond is a warrantability condition Fannie Mae verifies on the project questionnaire.
Not in the policy
A board wrongful-act or mismanagement suit
A claim that the board enforced a covenant selectively, rejected a sale, or mismanaged the association is a governance dispute against the directors.
Covered by Directors & Officers
Damage to the buildings and common elements
Fire, wind, water, or vandalism damage to the townhome structures, roofs, and common elements is a first-party property loss on the master program.
Covered by Commercial Property
A slip-and-fall or resident injury
If a resident or guest is hurt on a private road, a shared walkway, or at the pool, the bond does not respond.
Covered by General Liability
An unexplained shortfall in the accounts
A discrepancy the association cannot tie to a specific, provable dishonest act by an identified person is excluded.
Theft discovered after the discovery window closes
The ISO discovery form CR 00 20 covers loss discovered during the policy period or within 60 days after it ends.
Claims crime & fidelity pays
A townhome theft reads the same whether the townhome is recorded as a condominium or a PUD. The recorded form only decides whether a bond was ever required to be there. These are the crime losses townhome associations actually face. Each row shows the typical loss band.
Treasurer embezzles a condominium-recorded association's reserves
A volunteer treasurer with sole signing authority moves reserve money to a personal account over several years.
$50K–$500K+
Management company diverts assessments before they hit the books
A CAM firm collecting monthly assessments into a commingled account skims payments before they reach the association.
$50K–$1M+
Spoofed-vendor wire drains the operating account
A board member gets an email that looks like it is from a landscaper.
$25K–$250K
Forged checks after a signature is copied
A bookkeeper forges the treasurer's signature on blank checks, or a vendor intercepts and alters an association check, to drain the operating account.
$10K–$150K
Ranges are typical loss bands for these claim types, not a quote. Actual exposure depends on reserve size, assessment income, cash-handling controls, whether a management company holds the funds, and whether the bond reaches the manager.
What hoa buyers are required to carry
The limits contracts and statutes set for this line, and what moves your premium and terms.
- Fannie Mae (condominium-recorded)
- 3 months assessments + reserves, over 20 units
- Fannie Mae (PUD-recorded)
- Not required by the project standard
- Lender project questionnaire
- Fidelity confirmed by recorded form
A condominium-recorded townhome over 20 units must carry fidelity or crime coverage at least equal to three months of aggregate assessments plus reserves. Without documented financial controls it rises to the maximum funds in custody. Below the floor, units are non-warrantable. Selling Guide B7-4-02.
The Fannie Mae fidelity mandate reaches condominium and co-op projects, not PUDs. A fee-simple PUD townhome is exempt from the warrantability requirement, though the governing documents or a lender may still ask the association to carry a bond.
A lender classifies the project from the recorded declaration and asks the fidelity question only where the project is a condominium or co-op. Answering the questionnaire the way the declaration reads keeps a condominium-recorded townhome from stalling at closing over a missing bond.
- The required bond limit
- Bigger reserves, bigger bond.
- Financial controls and account structure
- Separate operating and reserve accounts, dual check-signing on reserves, and bank statements sent directly to the board lower the premium.
- Whether a management company handles funds
- A self-managed townhome board holding its own accounts and a professionally managed one price differently.
- Loss history and the wire-fraud endorsements
- A prior theft or a claims history raises the rate.
Endorsements that close the gaps
The base form is the start. These add-ons are where the policy gets built to fit hoa.
Managing-agent / management-company coverage
Extends the townhome association's bond to dishonest acts by the CAM firm and its employees who handle association funds.
Computer and funds-transfer fraud
Covers association money moved electronically without authorization, such as a fraudulent instruction sent to the bank to transfer reserve funds.
Social engineering / deception fraud
Closes the voluntary-transfer gap when a board member or manager is tricked into wiring money to a fake vendor.
Extended discovery period
Lengthens the window to discover a theft after the bond ends, beyond the 60 days the ISO discovery form CR 00 20 provides.
By the numbers
The Fannie Mae project scope, fidelity formula, and ISO crime-form mechanics that surface when a townhome association is quoted for a bond or answers a lender's condo-versus-PUD questionnaire.
- Fannie Mae fidelity mandate scope
- Condo and co-op projects only, not PUDs
- Fannie Mae fidelity amount formula
- 3 months assessments + reserves
- Condo, co-op, and PUD eligibility scope
- PUD is a distinct project type
- ISO commercial crime discovery trigger
- CR 00 20 discovery, 60-day window
- How long occupational fraud runs before discovery
- Median 12 months
Fannie Mae requires fidelity/crime coverage for condominium and co-op projects, with exceptions for projects of 20 units or fewer. Planned developments are outside the mandate, so a townhome's recorded form decides whether the requirement applies.
The required coverage equals at least three months of assessments on all units plus reserves. With documented financial controls it can rest at three months of assessments. Without them it rises to the maximum funds in custody of the association or its manager at any time.
Fannie Mae treats condominiums, co-ops, and PUDs as separate project types with separate standards. A townhome recorded as a PUD is a fee-simple project, which is why the condo-scoped fidelity requirement does not reach it.
The ISO discovery form CR 00 20 covers loss discovered during the policy period or within 60 days after it ends, regardless of when the act occurred. The loss-sustained form CR 00 21 instead ties coverage to loss occurring within the policy period.
The ACFE found a typical occupational fraud runs about 12 months before it is caught, with a median asset-misappropriation loss of $120,000. Reserve embezzlement often runs longer, which is why a bond's discovery window matters alongside its limit.
Common questions
about crime & fidelity for hoa insurance
It depends on the recorded form, not the architecture. A townhome recorded as a condominium over 20 units must carry fidelity or crime coverage under Fannie Mae Selling Guide B7-4-02, or its units are non-warrantable. A townhome recorded as a fee-simple PUD is exempt from that mandate, because the Fannie Mae fidelity requirement reaches condominium and co-op projects, not planned developments. So confirm the recorded declaration and CC&Rs first: two rows that look identical from the street can carry opposite obligations.
A condominium-recorded townhome gives the owner the airspace of the unit plus a share of common elements, and the association owns the structure and land in common. A PUD-recorded one gives the owner the lot and attached structure in fee, and the association owns only common areas. Read the recorded declaration and plat, not the building, to see which. That declaration, filed under the state condominium act or as a planned-development declaration, controls the fidelity question.
On a condominium-recorded townhome, Fannie Mae sets the floor at three months of aggregate assessments on all units plus the full reserve balance. Where the association documents financial controls, separate reserve accounts and two signatures on reserve checks, the amount can rest at three months of assessments. Where those controls are absent, it rises to the maximum funds in the custody of the association or its manager at any time. Recalculate the bond at each renewal, because reserves grow with every contribution.
Only if the bond is endorsed to reach the CAM firm, or the association is a named insured on the manager's own crime policy. When an outside management company collects assessments and pays vendors from association accounts, a diversion by the managing agent is a real exposure. A bond written only for the association's directors and employees will not respond to it. Fannie Mae requires coverage where the manager handles funds, so confirm the managing-agent endorsement before relying on the bond.
Most townhome bonds use the ISO commercial crime program, either the discovery form CR 00 20 or the loss-sustained form CR 00 21. The discovery form covers loss discovered during the policy period or within 60 days after it ends, regardless of when the act happened. The loss-sustained form ties coverage to loss that occurs within the policy period. Since reserve theft often runs months before an audit finds it, the discovery basis and its window matter as much as the limit.
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