Short answer
Crime and fidelity coverage is intended to respond to the theft of association funds or property, including dishonest acts by people handling association money. Governing documents, lender requirements and some state statutes influence the limits an association should carry.
What this coverage is
Fidelity coverage addresses loss of money, securities or property resulting from dishonest acts. Broader crime forms may also address forgery, funds transfer fraud and computer fraud.
For associations, the critical question is usually who is covered: directors and officers, volunteers, employees and — importantly — the management company and its employees while handling association funds.
Why it matters to community associations
Associations often hold significant reserve balances that are accessible to a small number of people.
Lenders and secondary-market guidelines frequently establish minimum fidelity limits for condominium associations.
Coverage disputes often turn on whether the management company was properly included.
Common exposures
- Theft or misappropriation of operating and reserve funds
- Dishonest acts by a management company employee handling association accounts
- Forged checks or altered instruments
- Funds transfer fraud and social-engineering payment redirection
- Unauthorized electronic transfers from association accounts
Questions boards should consider
- Do our limits at least equal reserves plus operating funds for the relevant period?
- Is the management company and its staff covered while handling our funds?
- Do the governing documents or lender guidelines specify a required limit?
- Is social engineering or funds transfer fraud addressed, and at what sublimit?
- What internal controls exist over transfers, signatures and reconciliations?
Common misconceptions
Misconception: “The management company's bond protects the association.”
A management company's own bond protects that company. The association generally needs its own coverage, written to include funds handled by the manager.
Misconception: “Social engineering losses are covered automatically.”
Payment fraud induced by deception is often addressed by a separate insuring agreement with its own sublimit, if it is present at all.
Risk-management considerations
- Require dual authorization for transfers above a set threshold
- Separate the people who approve payments from those who reconcile accounts
- Verify banking instruction changes by phone using a previously known number
- Review bank statements at the board level on a defined schedule
Frequently asked questions
How much fidelity coverage should an association carry?
A common starting point is the total of operating and reserve funds the association holds or that pass through the manager, adjusted for governing document and lender requirements.
Are volunteers covered?
Many forms extend to volunteers and board members, but the definition of employee varies by policy and should be reviewed.
Sources
Coverage depends on the specific policy language, endorsements, facts of the loss and applicable law. This page is general information, not legal advice or a statement that coverage applies.
Written and reviewed by The Duncan Group Community Association Practice. Last reviewed September 2026.