Loss Assessment Coverage

Loss Assessment Coverage, also referred to as special assessment insurance, is an optional coverage you can add to your homeowners insurance or condo insurance. It helps you pay your part of a claim against a master policy. This coverage comes in for deductibles for the shared community’s HOA master policy or liability incidents and property damage in common areas that exceed the master policy coverage limits.

Loss Assessment Coverage

In other words, it pays for damaged stairwells, gyms, pools, and other services. And there are also liability claims if an individual gets hurt in any of these common areas. Your typical condo or homeowners insurance policy does not offer this coverage.

How Does it Work?

When you hear about this loss assessment coverage, you may be wondering about the master policy and the HOA fees you pay for common area insurance. Yes, your HOA or condo association has a master policy that helps cover common areas. Most incidents in these shared spaces are covered by this policy. However, you need to know that there are limits. Big accidents like tornadoes or fires can cause costly damage to elevators, roofs, and ankles.

If a loss exceeds the master policy’s coverage or isn’t covered at all, your HOA might have to cover the remaining costs by assessing them for homeowners. This is where “loss assessment” comes in. Without additional coverage, your policy usually covers up to $1,000 for incidents. But if you have loss assessment coverage, it can help cover costs beyond that initial amount. This will save you from dipping into your emergency savings to cover community expenses.

What Does Loss Assessment Coverage Cover?

Just like I have mentioned above, this coverage helps to cover losses and damage that are beyond a master policy when you are asked for the remainder. This includes;

  • Liability claims for incidents that happen in shared areas, such as courtyards
  • Property damage in common areas such as the building and hallways
  • Medical bills for injuries in common areas that the association is responsible for

Keep in mind that this coverage won’t pay for property improvements that are not connected to problems covered by your insurance policy. For instance, it won’t help to pay for a new gazebo or swimming pool in your condo complex. Unless it was damaged by something covered by your policy, such as fire.

Who Needs Loss Assessment Coverage?

This coverage can be a very good choice for condo owners or homeowners who are in an association. And who may not have the ability to pay for their share of an expensive medical policy claim? Condo owner association membership policies have coverage limits and are deductible. If the association’s coverage can’t cover all the injury or damage claims, condo owners will be responsible for the additional costs. They will split the uncovered bill among all the unit owners in the form of a loss assessment. The Mater policy deductibles may range from $5,000 to $50,000. Your personal loss assessment policy coverage may also have an insurance deductible. But it is still better than paying a huge loss assessment all by yourself.

Loss Assessment Insurance Cost

This coverage endorsement on a condo policy may cost about $10–$25 in a year for $100,000 coverage. The cost of the coverage will be on top of your homeowners or condo insurance bill. According to our research, the average annual cost for condo insurance is $445 for a policy with $300,000 in liability coverage, $100,000 in personal property coverage, and a $1,000 deductible. However, the exact cost may vary by insurer, claim history, state, and the amount of coverage you need.

How to Purchase Loss Assessment Coverage

Before purchasing, you need to understand the provisions in your homeowners or condo association bylaws regarding this coverage. Familiarize yourself with the circumstances under which the assessments can be imposed. Also, review your association’s membership policy to know its deductibles and coverage limits. You should ensure that the association is paying its premiums. If not, the master policy may lapse and leave with costs if there is a claim.

Insurance policies always have about $1,000 in loss assessment coverage. Have a word with your insurance agent to know if it will be enough for you. Review common areas like pools to gauge your risk of an assessment in the future. Ask your insurance company or agent about the exclusions in your coverage.

What if I don’t have Loss Assessment Coverage?

If you don’t have this, you may put your finances and condo at risk. If a very expensive claim is made against your master policy, you will have to pay your share of assessments out of your pocket. And if you don’t pay, there can be very serious consequences. A condo owner without this coverage may find it difficult to pay their share and become delinquent. The association may then add fines and late fees and restrict access to the common areas.