Loss Assessment Insurance can cover deductible assessments when the association requires condo owners to pay a portion of the master policy’s deductible to help cover a claim. Specifically, this coverage can cover damage assessments when there is damage to a common area. Such as a pool or gym and the association’s master policy doesn’t fully cover the repair costs. It can also help with liability assessments if someone is injured in a common area. And successfully sues the association, leaving condo owners responsible for a portion of the costs.
Loss assessment coverage may not be required. But it can provide protection for condo owners against unexpected costs from special assessments filed by the homeowners association. The amount of coverage needed will depend on the association’s master policy limits and deductibles. The homeowner and condo association’s master policy provides insurance for buildings and common areas, but most times. It may not always be enough to cover all the costs. Loss assessment coverage also helps fill in the gaps and ensure that condo owners are not left with a huge sum in the event of a claim.
How Does it Work?
Homeowners insurance and condo insurance policies commonly include up to $1,000 in loss assessment coverage to assist in covering deductibles. Or claims that exceed the limits of the master policy’s coverage. You may have the option to extend your loss assessment coverage by an additional $10,000 to $100,000. By adding an endorsement to your homeowners or condo insurance policy, providing extra financial protection
For instance, if a hurricane causes substantial structural damage to your condo building and the condo association’s master policy covers all but $75,000 of the damage, the remaining amount may be divided among condo owners as a loss assessment. Without loss assessment coverage, you would be responsible for covering these costs personally. Loss assessments can arise unexpectedly and prove to be financially burdensome.
It’s important to note that a condo association’s master policy differs from your individual condo insurance policy. While your condo policy protects what is within your unit, the master policy provides coverage for the building and common areas.
What does it Cover?
Loss assessment insurance is designed to provide coverage for damages. And losses that exceed the limits of a master policy, for which condo owners may be billed. This type of insurance can be particularly beneficial in several scenarios, including:
- Liability claims are caused by incidents that occur in shared areas, such as courtyards.
- Property damage to common areas, like hallways or the building’s roof.
- Medical expenses related to injuries caused in common areas that the association is liable for.
These types of coverage can provide a valuable safety net, making sure that condo owners are not left to shoulder the full cost of damages or liabilities that exceed the master policy’s limits.
Who needs Loss Assessment Coverage?
Loss assessment coverage can be a prudent choice for a homeowner or condo owner who is part of an association and may not have the financial means to cover their share of a costly master policy claim.
Condo owner association master policies often come with deductibles and coverage limits. If the association’s coverage proves insufficient to address damage or injury claims, the condo association’s bylaws typically hold owners responsible for the additional costs. These uncovered expenses are then divided among all condo owners in the form of a loss assessment.
Commonly, master policy deductibles can range anywhere from $5,000 to $50,000.
Having your own loss assessment policy can provide a valuable safeguard. While this policy may still carry a deductible, it could ultimately be less burdensome than bearing the full weight of a large loss assessment on your own.
Costs of Loss Assessment Insurance
A loss assessment coverage endorsement on a condo insurance policy may cost as little as $10 to $25 per year for $100,000 coverage, according to an industry expert. The cost of loss assessment insurance will be added to your condo or homeowners insurance bill.
The average cost for condo insurance is $445 a year for a policy with $100,000 in personal property coverage. And $300,000 for liability coverage, and a $1,000 deductible, based on an analysis by a financial publication.
The exact cost can vary depending on the insurance company, your location, your claim history, and the amount of coverage needed.
Tips for Buying Loss Assessment Coverage
Here are tips for buying loss assessment coverage to help you protect yourself against costly loss assessments.
- Review your association’s bylaws to understand the provisions regarding the loss assessments.
- -Get familiar with your association’s master policy to understand the coverage limits and deductibles. Make sure the association is paying its premiums on time.
- Carefully review your own policy to see if the amount of loss assessment coverage provided is enough for your needs.
- Pay close attention to any common areas, such as swimming pools, that may pose a risk of future assessments, and ask your insurance agent about exclusions from your coverage.
By following these tips, you’d get a better loss assessment to protect yourself and your finances in case of unexpected expenses arising from damages or injuries in your shared living space.