Loss Assessment Coverage Follow

Why Condominium Owners Need Loss Assessment Coverage

Protect Yourself From Unexpected Assessments 
As a condo owner, you are responsible for your share of the building’s common areas such as the roof, elevators, lobbies, and amenities. When damage or a lawsuit exceeds the limits on the primary policy the remaining costs are passed on to owners as a special assessment.  Without Loss Assessment Coverage, you could be facing thousands, in some cases tens of thousands of dollars in unexpected bills for a single roof leak, fire, or legal claim. With Loss Assessment Coverage, your share is covered. It’s peace of mind that protects your finances and investment from sudden, costly surprises and ensures an unexpected event does not become a personal financial crisis.

In Practice:

If a fire damages the lobby (a common area), the association's insurance might cover up to $100,000, but if repairs cost $250,000, the remaining $150,000 is the association's responsibility to cover. The association may then levy a special assessment to unit owners dividing the $150,000 among them. If there are 30 units, each owner might be assessed $5,000. Owners with loss assessment coverage means you will not have to scramble to pay large, unexpected bills or risk dipping into savings.

What Does Loss Assessment Coverage Help With?

Natural Disaster Damage: 

When storms or other disasters damage shared property and repair costs exceed the primary policy limits owners may need to pay the difference. Loss assessment coverage helps pay your portion.​ 

High Deductibles: 

Associations often have large policy deductibles that, after a claim, are split among owners. Loss assessment coverage helps reduce your out of pocket expense.​ 

Liability Claims: 

If someone is injured in a common area and legal/medical bills go beyond the primary policy your share of these costs is covered.​ 

Avoid Financial Surprises: 

Even if you never use certain shared amenities you are still responsible if the costs rise above the primary policy limits.  Without loss assessment coverage these assessments come straight from your pocket potentially costing thousands. Adding this coverage means you won’t have to scramble to pay large, unexpected bills or risk dipping into savings

Who Needs Loss Assessment Coverage?
All condo owners who belong to an association, especially those with primary policies featuring high deductibles or limited coverage for certain perils.  Coverage can often be added to the existing condo policy at minimal cost.

Covered Loss vs Association Responsibility

A Covered Loss refers to a situation where damage or liability falls within the perils or risks that are included under an insurance policy, such as fire, theft, or certain types of water damage. In the context of condominiums or community associations, whether a loss is covered is determined by both the association’s primary insurance policy and the individual unit owner's insurance policy.​

Association responsibility refers to the common areas, elements, or types of property and liability that the association has obtained through its primary insurance policy. It is required to insure, maintain, and repair the items. This often covers the building structure, common areas (e.g., lobbies, roofs, elevators), and shared amenities, as well as liability for accidents in those spaces.​ Your personal HO-6 policy is designed to cover what is on the inside of your unit.  One way to think about it is if you were to turn your unit upside down and shake it, everything that falls out and any upgrades you have made to the unit would fall under the unit owner’s responsibility to cover through their HO-6.

In Practice: 

If a pipe bursts in a wall between your unit and the hallway causing water damage to your kitchen, flooring, and belongings.  The Association Primary policy generally covers the repair of the pipe itself, the damage to any walls, any standard fixtures originally installed and restoration of any common elements or original fixtures.

Your HO-6 (unit owner’s) policy is specifically designed to cover costs related to repairs and replacement of upgraded cabinets, countertops, personal property, and other interior improvements in your condo if these items are damaged by a covered event such as water damage, fire, or theft.  

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If you have any further questions on the benefits of Loss Assessment Coverage or what it covers you can reach out to Community Risk Advisors (CRA). They assisted us in putting this together and would be happy to answer any questions you may have. You can send an email to tyler@communityriskadvisors.com or call (434-229-4058).