What Is Loss Assessment Coverage?
Loss assessment coverage is an optional but valuable addition that you can add to your condo insurance. Loss assessment coverage provides protection to condo owners and can be used on claims involving the building or its common areas. Why is loss assessment coverage so valuable? In most condo communities, you will have an HOA policy (homeowners association policy) that covers incidents occurring outside your own personal unit. However, depending on your policy these claims frequently exceed the HOA master policy limits which is when loss assessment coverage steps in and keeps you from paying large amounts out of pocket.
What Real-Life Situations Will Loss Assessment Help Cover?
Loss assessment insurance coverage is as important as it sounds, and really will come into play in real-life situations. Here are some of the major situations that loss assessment will help cover:
Major Weather Damage:
One situation where loss assessment insurance coverage protects you is in the case of major weather damage such as building damage cause by hail or wind. Your HOA master policy may not cover the entire cost of the damages. For example, let’s say the total cost of damages occurred is $550,000 and you HOA master policy only carries $500,000 in property damage. Because of this, the extra $50,000 would be an expense charged to the condo owners. So if you lived in a 50-unit building, every condo owner in the building would pay $1,000 out of pocket to cover the damage. However, if you have loss assessment coverage, it can usually cover that cost for you, ensuring that untimely damages don’t put unexpected strain on your personal finances.
Injury in a Common Area:
Something you may not know is that when living in a condo, you have a partial responsibility for whatever happens to guests on the property. This is because your HOA policy is in charge of the common areas of the condo community. So if someone gets injured in a common area of the condo community, for example, someone breaks a leg on the tennis courts or maybe slips in the lobby and dislocates a shoulder or breaks a rib, their injury bills may exceed the HOA liability coverage. What this means is that the excess cost not covered by the HOA liability will come out of pocket from all the residents / condo owners. Luckily, loss assessment coverage can cover your end of things and can help you avoid being left on the hook for an injured guest’s medical fees.
Shared property damage inside building:
Living in a condo is similar to living in an apartment where you have many shared features and common areas used by all the residents of the building. However, the difference is that in an apartment building, the shared and structural items of the building usually belongs to a management company or landlord. In a condo, the shared items are actually jointly owned by you and the other residents. Because of this, you are partially responsible for any damages to shared areas. For example, if a fire, explosion or other covered loss damages the elevators, lobby, carpeting, inner walls, etc., you may be asked to contribute to the payments to repair those damages if the cost exceeds the HOA master policy limits. If you invest in loss assessment coverage, it will help make the fixes to these damages with out costing you out-of-pocket.
How Much Loss Assessment Coverage Do I Need?
A general guideline to how much loss assessment protection you should get is as much as you can comfortably afford to ensure you have the greatest peace of mind against any unpredictable mishaps. When deciding how much coverage to get, you should first look into your HOA master policy to get a better insight on what you are responsible to cover versus what the HOA is responsible to cover, how high the coverage limits go, and whether or not special deductibles are provided for certain hazards. We recommend you to get a free condo insurance quote online or call us at (415)-386-2283 and start planning your policy today!
Contributor: Smruthi Sriram