Loss Assessment Explained for Condo Insurance

Condo Owner Coverages: How Loss Assessment Insurance Protects You

Damages in shared areas of a condo - loss assessment
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Loss assessment is a type of insurance coverage that protects condo owners in the event of damages to common areas of the property. The homeowner association (HOA) may pass on part of the bill to unit owners. If you have loss assessment coverage, it can help defray that cost.

Learn more about loss assessment, what's included in this type of coverage, and what to watch out for when shopping for insurance.

What Is Loss Assessment in Condo Insurance?

Loss assessment coverage is an add-on to your condo insurance policy. It bridges the gap between the HOA's master policy and your condo policy.

This insurance coverage applies to damages in common areas such as stairwells, lobbies, pools, and so on. If these cases, the HOA may hold unit owners financially responsible for part of the deductible. This type of coverage will help cover those costs up to the limit you choose.

How Does Loss Assessment Work?

Most condo owners pay monthly fees to their HOA. Part of these fees goes to pay the HOA's master insurance policy. But, sometimes damages exceed the limits of that policy. In other cases, the HOA's policy may have a high deductible.

The HOA may assess unit owners for the loss. The owners wind up sharing that cost. The amount to be paid by each owner is assessed by the HOA. This is known as the loss assessment. As an owner, you then have to pay your share to cover the damage.

Loss assessments could apply to property damage, liability, injury on the premises, or deductibles.

Doesn't Condo Building Insurance Pay for the Damage?

Many first-time condo owners assume that their HOA's insurance will cover damages to shared areas. But buildings often have very high deductibles. Condo owners then become responsible for paying part of the costs. This is true even if the damage itself is covered by insurance.

Inform yourself about the HOA's coverage by asking questions. Otherwise, you could end up with a surprise bill.

How to Get Loss Assessment Coverage

Loss assessment is a coverage that is part of a condo policy form. When you buy your insurance policy, you can ask about this coverage. Check your insurance amounts on your policy declaration page.

If you have just purchased new insurance for your condo, townhouse, or co-op, you can also ask to see your binder of insurance. Often an HOA may ask you to provide this at the time of signing for your new home. 

What Does This Insurance Cover?

Loss assessment on your condo or co-op policy may apply to:

  • Claims arising from situations including the building itself
  • Shared areas of the structure your condo is a part of

Be sure and ask about exclusions and limitations of your coverage. It varies depending on your insurance policy.

Does It Cover All Assessments?

Your policy may not include coverage if you didn't buy insurance for the risk or peril that the assessment is for.

For instance, if the HOA levies a loss assessment against you for earthquake damage and your insurance does not cover earthquakes, you may not be covered.

Warning

Pay special attention to water damage, which is a major issue for condo insurance.

What if the master HOA policy covers a loss, but the damage exceeds coverage in the building's policy? Then the owners of the units may be liable for a part of the costs.

Loss Assessments and Deductibles

Loss assessments can also apply to the deductible payable on the master policy. Building deductibles may be high and could be in the thousands of dollars. When a deductible becomes payable in a claim, the amount is divided among all the unit owners.

How to Get More Loss Assessment Coverage

What if you look into your HOA's master policy coverage and decide that your loss assessment coverage isn't sufficient? Ask your agent if you can increase the amount by adding an endorsement.

You can also shop around to find out if another insurer will protect you better. You may also wish to look into high-value home insurance. This provides higher limits of coverage.

The best way to find out is to discuss the options with your insurance broker. If your current insurer can not help you, and you find a better deal somewhere else, you may consider canceling your policy to get the coverage you need. You do not need to wait for your renewal date to change insurers.

Limits of Coverage on Condo Policies

Insurance policies have specific limits for many coverages, such as jewelry or collectibles. Find out what your limits are. Also, ask if there is a limit for assessments due to a deductible.

Every master condo or HOA policy is different. Your needs will depend on the type of coverage your HOA has on the building.

Do not ever rely on the condo building insurance to protect you fully. Every condo or co-op owner should have their own policy. This will help avoid extra costs and surprises.