Tennessee homeowners’ associations that collect dues for common expenses will need a specific kind of insurance starting Jan. 1, 2027. Public Chapter 731 requires those associations to carry a blanket fidelity bond that protects the association if someone entrusted with its money steals it.
The law is Senate Bill 2326 by Sen. Yarbro, substituted for House Bill 2338 by Reps. Hemmer, Boyd, and Hardaway. It passed the Senate 30-0 on March 23, 2026, and the House 91-0 on March 26, 2026. The governor signed it April 23, 2026.
What the law requires
Under the new Section 66-27-902, an HOA collecting assessments for common expenses must obtain and maintain a blanket fidelity bond to insure the association against losses from theft or dishonesty committed by:
- the association’s officers or directors,
- people employed by the HOA, or
- a managing agent or an employee of the managing agent.
The law’s definition of homeowners’ association includes a unit owners’ association organized under Section 66-27-401, so condominium associations are covered too, not just single-family subdivisions.
How much coverage
The bond or insurance policy must cover an amount equal to the association’s reserve balances plus one-fourth of its aggregate annual assessment income, with a $10,000 minimum. The board of directors or the managing agent may buy the coverage on the HOA’s behalf.
| Requirement | Public Chapter 731 |
|---|---|
| Who must comply | HOAs, including condo unit owners’ associations, that collect assessments for common expenses |
| What it covers | Theft or dishonesty by officers, directors, HOA employees, managing agents, or their employees |
| Coverage amount | Reserve balances plus one-fourth of aggregate annual assessment income |
| Minimum | $10,000 |
| Effective date | Jan. 1, 2027 |
A simple illustration of the formula: an association with $80,000 in reserves and $120,000 in yearly assessments would need at least $80,000 plus $30,000, or $110,000. This is an example only; your association’s numbers will differ.
The bill originally would have taken effect July 1, 2026. Senate Amendment 1 moved the date to Jan. 1, 2027, which gives boards a few months to shop the coverage.
Why unit owners should pay attention
When association money disappears, the shortfall usually comes back to owners as a special assessment. Your own condo policy (often called an HO-6) may include some loss assessment coverage, but limits and covered causes vary by policy form. A properly sized fidelity bond at the association level is the first line of defense; your personal policy is the backstop.
Questions to bring to your next board meeting
- Does the association already carry a fidelity bond or crime policy, and what is the limit?
- Does it cover a third-party management company and its employees?
- Is the limit at least reserves plus one-fourth of annual assessments, and at least $10,000?
- Who will confirm compliance before Jan. 1, 2027?
Related reading for condo owners: A Condo Insurance Credit Model Is Changing in Tennessee on Oct. 23 and Farragut’s Feb. 10 flood-map revision is live — condo owners still need the master policy and an HO-6.. Board members thinking about personal liability can also review Umbrella Insurance in Tennessee: What It Covers, Who Needs It, and How Much It Costs in 2026, and associations comparing business coverages can start with What is Commercial Insurance and Why Is It Important?.
Related reading from All Seasons
- A Condo Insurance Credit Model Is Changing in Tennessee on Oct. 23
- Farragut’s Feb. 10 flood-map revision is live — condo owners still need the master policy and an HO-6.
- Umbrella Insurance in Tennessee: What It Covers, Who Needs It, and How Much It Costs in 2026
- What is Commercial Insurance and Why Is It Important?
Free policy review
All Seasons Insurance Group offers a free personal policy review. Call 865-263-1400 or visit asigtn.com/get-a-quote/. This article is informational only and does not promise coverage or eligibility; your policy forms control. Seasons change. So should your coverage.
When does Tennessee’s HOA fidelity bond law take effect?
Public Chapter 731 takes effect Jan. 1, 2027.
Which associations must carry the bond?
Homeowners’ associations that collect assessments for common expenses. The law’s definition includes condominium unit owners’ associations organized under Section 66-27-401.
What does the fidelity bond protect against?
Losses from theft or dishonesty by officers, directors, HOA employees, a managing agent, or the managing agent’s employees.
How much coverage is required?
An amount equal to the association’s reserve balances plus one-fourth of its aggregate annual assessment income, with a $10,000 minimum.
Who can buy the bond?
The law says the board of directors or the managing agent may obtain the bond or insurance on behalf of the HOA.
Does my condo policy cover HOA theft losses?
Some HO-6 policies include loss assessment coverage, but limits and covered causes vary. Review your policy form with an agent.
How did the bill pass?
The Senate passed SB2326 30-0 on March 23, 2026, the House passed it 91-0 on March 26, and the governor signed it April 23, 2026.
How can All Seasons help after reading this?
Call 865-263-1400 or visit asigtn.com/get-a-quote/ for a free personal policy review. Informational only; no coverage promises. Seasons change. So should your coverage.
