What is Loss Assessment Coverage?

What is Loss Assessment Coverage?

Got a condo or townhouse? If you own a condo or town-home, you owe it to yourself to read this article and ask yourself, “am I fully covered by my HOA insurance policy?”  If you’re unsure, a loss assessment coverage policy is a protection that condo owners can use on claims that involve the building or its common areas. Most condo communities have a homeowners association (HOA) that has an insurance policy that covers the incidents that may occur outside of your particular unit—but, that you’re still responsible for. Sometimes, these claims may exceed the HOA master policy limits, leaving you and your fellow condo dwellers to make up the difference. By purchasing an adequate loss assessment coverage policy, you help ensure that you don’t pay out-of-pocket when common area incidents require your assistance.

What Could Go Wrong: Potential Hazards for Condo Owners

Sometimes we purchase coverage that seems superfluous, but will it really ever come into play? You might be surprised at the costly perils  in a condo building or to the structure itself. Are you prepared?

Weather Damage:

As a hypothetical example, suppose your building is subject to damage from a catastrophic weather event. Let’s say a hailstorm strips away a significant part of the building, leaving $100,000 in needed repairs. The problem is that that your HOA master policy only carries $50,000 in property damage coverage.

In this case, the HOA might assess the extra $50,000 to the condo owners — if you’re in a 50-unit building, that’s $1,000 you have to produce for something that you thought was covered. It’s not.

Loss assessment coverage can usually cover that cost for you, making sure damage of this nature doesn’t put an unexpected strain on your finances.

Injuries in common areas:

Assumptions are often based on good-faith, but the real world operates on a different set of parameters. If a visitor—many of who you don’t see on a regular basis—injures themselves and holds your building liable, you may hold a partial responsibility to compensate them for their injuries.

As an example, if someone slips on the escalator at the entrance of your building, the bills from their injury may exceed the HOA liability coverage. What happens? If you have loss assessment coverage, the policy will cover your insurance responsibility (up to your policy’s limits), avoiding a huge financial burden for the injured guest’s medical bills and fees.

Damage to shared property:

Living in a condo or townhouse can feel similar to living in apartment building. One notable difference, however, is that an apartment building, including the shared (and structural) parts of property, belong to the owners of the property, not the landlord or the company that manages the property.

Let’s take an example. Suppose a fire ravages the property, destroying the elevator, lobby, carpeting, walls, and so forth. As an owner of the (shared) property, you may be asked to take on a proportion of the damages that go beyond your HOA master policy limits. Having an adequate loss assessment coverage helps you to make the repairs to restore the property to its previous state and make the fixes that you (and your neighbors) cannot do without—and should expect.

How Much Coverage is Enough?

The key to determining how much condo loss assessment coverage you need to be adequately covered is by taking a look at your HOA master policy. By carefully reading what the HOA is directly responsible for versus where your personal responsibility begins, you can make an estimate of how much insurance you should purchase. This includes special deductibles and package deals for insurance tha.

You may find that your umbrella insurance policy  and other policies have gaps that can be costly. The general rule of thumb is to purchase as much loss assessment coverage as financially possible in your budget against unpredictable mishaps.

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If you found yourself asking if you’re covered, it may in your best interest to find out, right? Of course, digging through insurance policies’ fine print can be like finding a need in a haystack. One catastrophe and you could be paying out-of-pocket for coverage that you assumed was part of your HOA master policy. That’s why hiring an expert insurance advisor can pay off for your wallet and your peace of mind, deciphering the jargon and guaranteeing the welfare of your family and property. Contact the advisors at RiskBlock  and take all the uncertainty of your insurance coverage today.



Author: Liam Dai
Lead Insurance Advisor for RiskBlock. Disclaimer: This Blog/Web Site is made available by the author or insurance agency for educational purposes only as well as to give you general information and a general understanding of the insurance coverage, not to provide specific insurance advice. By using this blog site you understand that there is no professional advice and professional client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for professional advice from a licensed professional insurance agent in your state. All scenarios are different and unique to the situation.