Whether your condominium is located in the center of a major city or on the outskirts, it costs at least a few hundred thousand dollars – the average price of a condo in New York and Los Angeles can reach $1 million for that matter – and is likely insured. And just not insured! It is insured by both your HOA insurance and condo insurance, which altogether creates a feeling of eternal safety.
Alas, the two mentioned insurances do not safeguard you against all possible risks. Not only may navigating homeowners associations be tricky, but there might be situations when you’ll need more than the two mentioned coverages. But let’s not get ahead of ourselves. Before we proceed to dissect this unique and helpful type of coverage, let’s elaborate on what makes up a typical condo insurance policy.
Typical coverage for a condominium comprises:
Now, why would you need some extra coverage on top of everything? Let’s dig deeper into it.
Condo associations do provide some coverage under the HOA policy – coverage for the building structure, perils, and liability (accidents that happened on a shared condo territory belonging to HOA) – but it may not be enough to safeguard you against financial troubles, and here’s why:
Your condo insurance – as well as the specific loss assessment part of it – may come in handy anytime when the deviation from the expected takes place.
Now, what specifically does loss assessment coverage, also known as loss-based assessment coverage, cover? Loss assessment coverage for condos covers claims that weren’t fully paid by the HOA policy (the policy of your condo association). In other words, it covers anything that is not part of your condo unit but is a shared part of the condo.
To avoid any confusion with the terminology, let’s clarify: special assessment insurance is exactly the same as loss assessment coverage. Therefore, it provides the same type of protection, mitigating the financial risks coming from the shared property’s claims that were not fully covered (paid) by the HOA insurance.
Loss assessment coverage may come in handy in many cases, though the most common are the next two:
Even though the master insurance can cover $250,000 or $500,000 or even as much as $1,000,000, it may not be enough to cover the expenses coming from a storm or fire. When the structure or the outsides of the building is severely damaged, the unlucky co-owners sometimes have to chip in. For example, if the HOA coverage limit is $250,000, the actual losses are $500,000, and there are 100 co-owners, then each of them will have to pay $2,500 out of his or her pocket. However, if you owned loss assessment coverage, it would cover your part of the expenses.
Whether this is a shared gym, pool, or restaurant that witnessed a severe physical injury of a third party, the HOA limits may not be sufficient to cover the expenses. Loss assessment coverage, however, will come in handy to cover the excess.
Note, though, that loss assessment coverage does have its limits as well, which are determined independently in each case.
Not only does this coverage have its monetary limits, but it is also limited as to the number of cases that it applies to. For example, if your cooperative issued a assessment to cover the costs of a maintenance project – for example, the renovation of one of the pools – then your loss assessment coverage wouldn’t cover that.
As a rule, renovation, maintenance, and repair are not covered.
There are two things to check in advance:
Then, as you know the peculiarities of your case, you can proceed to purchase your condo loss assessment coverage.
Loss assessment coverage costs pennies. More often than not, you can buy it for as little as $10 to $50 per year, which is peanuts compared to the safety it provides, covering up to $100,000 and more. At the same time, the premium may increase significantly if you want to increase the loss assessment coverage limits or decrease the deductible on your policy.
You can purchase the coverage you need from your insurance provider. What’s more, it may go as an endorsement to your existing condo policy, which means you can just add it to your existing policy, leaving the rest of it intact. Note, however, that your premium will inevitably increase as you add extra coverage to your policy.
Loss assessment coverage is very helpful in reducing – if not nullifying – the legal risk of the inability to pay the share. Should an expensive claim occur and you don’t have enough money to pay, a legal proceeding may follow. However, if you have an adequate amount of coverage, you will likely be able to deal with any financial adversity.
Oleksandr is an expert in deep research. He covers various insurance topics across verticals, adopting to every local law.
