The Importance of Loss Assessment Coverage
Loss Assessment is often overshadowed by the main coverages in a condo owner’s (HO-6) insurance contract. Though it’s easily overlooked, it fills some critical gaps in coverage that can leave you with substantial out-of-pocket costs in certain scenarios. Though not typically a point of emphasis during risk assessments, let’s review the importance of loss assessment coverage:
HOA Master Policy
Most condo communities have a governing condominium homeowners association (HOA). The HOA is equipped with an insurance policy that provides coverage for incidents that occur outside of a condo owner’s personal unit. This is commonly known as a master policy, and some condo owners wrongfully assume it is adequate enough to account for all incidents that occur in a shared area of the property or community, like lobbies, stairwells, pools and outdoor spaces.
However, in the event that damages from an incident exceed the limits of the HOA’s master policy, all condo residents may have to pay out of pocket for any losses, even if they were not at fault. To avoid this, loss assessment coverage is a critical add-on that all condo owners should consider.
What is Loss Assessment Coverage?
Loss assessment coverage is an add-on to standard condo policies. It provides much-needed protection in instances where owners of a shared property are held responsible for a significant portion of the costs associated with a covered incident. Examples of this may include the following:
1. A major hailstorm occurs and causes $550,000 worth of damage to the condo building. While the HOA has a master policy, it only covers $500,000 worth of damage, leaving all condo residents to pay for the additional $50,000 of uncovered damage out of pocket.
2. A visitor to the condo property injures themselves on the tennis court. Unfortunately, their injury bills exceed the HOA’s liability coverage, creating a major financial burden for condo residents.
3. A fire breaks out and destroys a large portion of the lobby. The HOA’s master policy isn’t adequate enough to cover all of the damages, and condo owners are forced to pay a portion of the repairs.
Simply put, loss assessment coverage provides a safety net for condo owners, ensuring they do not have to pay for incidents that occur to shared property and exceed the limits listed in the HOA’s master policy. What’s more, loss assessment coverage can apply to property damage, liability, injuries that occur on condo property or deductibles.
Note – Though this post focuses on condo owners, it’s also important for residential homeowners located in a neighborhood with a governing HOA to review their loss assessment coverage limits, as well.
How much coverage do you need?
The amount of coverage you need will depend on the limits listed in your HOA’s master policy. We always recommend obtaining a copy of the master policy to first evaluate the coverage that’s in place. From there, we can work to find a limit you’re comfortable with. Most companies will offer higher coverage limits by endorsement for a nominal additional premium.
Contact Us Today
To learn more, and to secure a policy that’s right for you, click the link below to set up a time contact Charlie and our Team at Robertson Ryan & Associates today.
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Sourced in Part From: Zywave