In certain instances, your condo association may issue a special assessment for expenses outside your unit due to an insurance claim. To avoid paying for such expenses from your pocket, you must buy loss assessment coverage, an added protection for condo owners.
What Does Loss Assessment Mean?
In the event of damage to the building structure or common space in your condo, you may be charged a fee for the loss by your condo association. This fee that you need to pay is referred to as loss assessment. This may happen in two scenarios:
- Your condo association does not have adequate insurance coverage
- The deductible is higher than the damage expenses
Does My Condo Association’s Insurance Coverage Include Damage to the Condo Structure?
In the event of damage to the condo building structure or the common spaces by a covered peril, condo associations have insurance to cover the repair costs. Also, the liability coverage in the policy covers the medical expenses if someone is injured in the common spaces by the risks mentioned in the policy.
However, like all insurance policies, the condo association’s insurance policy has a deductible and coverage limit. While a deductible is an amount that is paid by the condo association at the time of settlement of a claim, the coverage limit refers to the maximum amount that your insurance provider will pay toward a claim.
If during a claim, the condo association’s coverage limit amount is not adequate to cover the repair work or the medical costs, they may issue a special assessment to each unit owner. This includes the outstanding amount of the claim which is divided equally among the owners.
How Does Loss Assessment Coverage Work?
If you do not have loss assessment coverage in your condo owner’s policy, you will have to pay the special assessment fees charged by your condo association due to its inability to pay fully an insurance claim, out of your pocket.
However, if you buy the loss assessment coverage you can protect yourself from such unexpected expenses in the following situations:
Damage to the building structure and common areas
When the repair costs exceed the condo association’s insurance coverage limits, in the event of damage to the building or the common areas by a covered peril, the remaining amount is charged to the condo owners as special assessment fees.
Injury in the common areas
If someone has an accident that results in a serious injury in the common area such as the clubhouse, stairwell, swimming pool, or tennis court, the condo association is liable to pay their medical and legal bills if it is at fault. If the cost is more than the liability coverage limit, the balance amount is shared by the unit owners as special assessment fees.
Condo association’s insurance deductible
The condo association’s master insurance policy typically has a high deductible that can range from $25,000 and above. To receive the compensation amount after filing a claim, the condo association needs to pay the deductible. If the deductible is higher than the amount claimed then they may collect it from the condo owners.
How Much Does Loss Assessment Coverage Typically Cost?
Loss assessment coverage is not very expensive. However, the cost may vary from one insurance provider to another and also on your coverage.
How Much Loss Assessment Coverage Do You Need To Buy?
To understand how much coverage limit you need for your loss assessment insurance, you must talk with your insurance provider. To determine the right coverage limit, they can study your condo association’s master policy, its coverage limit, and whether specific risks require special deductibles. Accordingly, they can get you customized coverage based on these factors.
Other significant factors that determine the loss assessment coverage limit include the number of common areas or facilities maintained by your condo association and the number of occupied units in the condo. The more the number of common areas and amenities, the higher the risks of damage and injury. You may choose a higher coverage limit for your insurance if there are several such areas in your condo.
During a claim, once the repair or medical bills exceed the condo association’s insurance coverage limit, the association charges a special assessment fee to the unit owners which is the balance amount. The sum is divided equally among the unit owners. If the number of condo units is less or if many units are unoccupied, you may have to a higher amount. So, in that case, you must buy loss assessment insurance with a higher coverage limit.