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The Importance of Loss Assessment Coverage

April 9, 2019

At most condo communities, a homeowners association (HOA) is equipped with an insurance policy that provides coverage for incidents that occur outside of a condo owner’s personal unit. This is commonly known as a master policy, and some condo owners wrongfully assume it is adequate enough to account for all incidents that occur in a shared area of the property, like lobbies, stairwells, pools and outdoor spaces.

However, in the event that damages from an incident exceed the limits of the HOA’s master policy, all condo residents may have to pay out of pocket for any losses, even if they were not at fault. To avoid this, loss assessment coverage is a critical add-on all condo owners should consider.

What is Loss Assessment Coverage?

Loss assessment coverage is an add-on to standard condo policies. It provides much-needed protection in instances where owners of a shared property are held responsible for a significant portion of the costs associated with a covered incident. Examples of this may include the following:

  1. A major hailstorm occurs and causes $550,000 worth of damage to the condo building. While the HOA has a master policy, it only covers $500,000 worth of damage, leaving all condo residents to pay for the additional $50,000 of uncovered damage out of pocket.
  2. A visitor to the condo property injures themselves on the tennis court. Unfortunately, their injury bills exceed the HOA’s liability coverage, creating a major financial burden for condo residents.
  3. A fire breaks out and destroys a large portion of the lobby. The HOA’s master policy isn’t adequate enough to cover all of the damages, and condo owners are forced to pay a portion of the repairs.

Simply put, loss assessment coverage provides a safety net for condo owners, ensuring they do not have to pay for incidents that occur to shared property and exceed the limits listed in the HOA’s master policy. What’s more, loss assessment coverage can apply to property damage, liability, injuries that occur on condo property or deductibles.

The amount of coverage you need will depend on the limits listed in your HOA’s master policy.