When you live in a home or a condo that is part of an HOA, you pay assessments for amenities and certain services for your community or building. These assessments are necessary to keep the association running smoothly. However, there are times when circumstances arise, such as damage to or injury occurring in a common area, which leaves your association liable for repair or damages.
Before this happens, it’s important to ensure that you’re covered! When you live in a home or condo that is part of an HOA, loss assessment coverage that protects your HOA from shared losses to common spaces is a very wise choice.
If you are a condominium owner, keep in mind that insurance generally only protects your property inside the unit. However, your condo’s HOA master policy covers damages to amenities (such as the pool, elevator, lobby, staircase, or fitness center). Your HOA maintains its own policy, but this does not mean that you will never be assessed with an unexpected expense stemming from the association’s loss!
What is Loss Assessment Coverage?
Loss assessment coverage protects you, as a homeowner, if a shared space in the HOA sustains damage. It also protects against accidents that may occur in common areas of the association.
When an accident does occur and the association is held liable in a court of law, your association’s master policy will cover the loss up to its coverage limits. When a claim exceeds those limits, the HOA will typically assess a certain and equal amount for each member to pay to cover the leftover loss amount. This can sometimes be in the thousands or tens of thousands! While your home or condo insurance will likely cover some loss (typically up to $1,000), you will very likely need more to help defray this additional expense. This is where loss assessment coverage comes in.
Is This a Required Coverage?
While not required, loss assessment coverage can save your bank account when added to your insurance policy. By reviewing your association’s master policy limits, you can see just what (and how much) it protects, and then determine whether loss assessment coverage is right for you.
What is Covered by Loss Assessment?
Loss assessment coverage will cover liability assessments when your HOA or condo association is held liable for injuries and the master policy coverage limits are not sufficient. Loss assessment coverage protects you when you, as an owner, are assessed for property damage that is covered by the dwelling portion of your home or condo insurance. Flood damage, earthquakes, and other natural disasters, along with general wear and tear, are not covered.
When purchasing a home or condominium, you may not realize how valuable loss assessment coverage could be for you in the future, especially when it comes to finances. However, it’s important to realize that this coverage will protect you in the following ways:
- Injuries/liability assessments
- Master policy deductibles
- Damage to common areas or shared property inside the building
- Exterior building damage
Loss assessment coverage works in addition to the HOA’s master policy by providing protection to homeowners when a building or common area is involved in a claim. By covering the remaining out-of-pocket expenses of qualifying perils, this policy can safeguard an owner from having to pay for unexpected (and often exorbitant) fees.
How Much Loss Assessment Coverage Do I Need?
As mentioned earlier, most home and condo insurance policies cover an owner for up to $1,000 (excluding liability). How much coverage you will need depends on your HOA.
Consider:
- Is there a fitness center with exercise equipment?
- Does your HOA contain a pond or water feature?
- Is your HOA large with, say, more than a few hundred homes?
- Are there pools and grill areas in your HOA?
- Are there many children in your neighborhood?
If you answered yes to any of these questions, you’ll likely want to obtain the most loss assessment coverage your insurance company offers. Understand that liability claims can result in the millions! Loss assessment coverage is a very small amount in comparison to what your personal potential loss could be.
