Curious about loss assessment coverage? In this article we share what loss assessment coverage is, how much it costs, and help you determine if you need this on your homeowner’s insurance policy.
Loss assessment coverage is an endorsement on your homeowner’s insurance policy that pays to repair or replace your home after damage occurs, typically due to weather events like wind or flooding. But what exactly does it cover? Here’s a rundown of how loss assessment coverage works, how much it costs, and who should get it on their homeowner’s insurance policy.
What Is a Loss Assessment, And How Does It Work?
A loss assessment is a charge assessed by your condo, co-op, or homeowners association to each unit owner to pay for a portion of a loss that affects the entire property. This type of charge is common when damage to the building from a fire, hurricane, or other disasters.
In the case of a loss, the condo owner’s policy will continue to provide coverage for the loss even after the HOA’s master policy has ended. However, if the condo owner’s deductible is more significant than their share of costs under the HOA’s Master Policy, they are responsible for paying the difference out-of-pocket.
The purpose of this charge is to help offset the cost of fixing things like windows and roofs on the whole building. A loss assessment helps share those costs, so they are not passed on solely to those who have their units damaged in an incident like a flood or storm.
Apartment owners can claim on their insurance policy if their HOA invoices them for damages caused by one of the events mentioned above. The condo owner will usually have to show proof of a deductible less than their share of costs. If they do not have enough coverage on their policy, they can apply for additional coverage or pay out-of-pocket.
How Does It Work?
Your home or apartment insurance policy may include loss assessment coverage as an endorsement. It’s a good idea to have if you share a building, as in a condo or HOA, and are financially liable for a part of any damage or loss to shared areas. Of course, your homeowner’s insurance still covers you without the endorsement, but it could help negotiate costs when it comes time to settle with the other party involved.
Let’s say, for example, that the structure of the condo building where you live gets insurance of $500,000. Your association’s insurance will pay up to the policy’s limit, so if a fire or a hurricane causes $550,000 in damage, you’ll only have to spend $50,000 to get everything back in working order. Each of the fifty unit owners in your organization could get a charge of $1,000 to cover the additional $50,000 costs caused by the association’s coverage inadequacy.
In that case, the special assessment would have to be paid out of pocket by condo owners who did not purchase loss assessment coverage as part of their insurance plans. However, condo owners with loss assessment coverage can turn to their insurer for assistance in meeting this expense. For example, suppose your condo association makes a special assessment for satisfying the association’s insurance deductible for a covered claim. In that case, loss assessment coverage might help pay your share of the price.
Does Condo Insurance Cover Assessments?
A common feature of condo insurance is loss assessment coverage, often known as special assessment insurance. Special assessment insurance covers the cost of assessments for a new roof or repairs to the structure that a particular unit has caused: special assessment insurance damages other units or common areas in the complex caused by the unit’s residents.
The cost of these repairs and replacements can be very high, and owners may not be able to afford them without this protection. Condo Insurance coverage like this provides an additional layer of protection for those who own condos and need to ensure they do not face any financial hardship from repair costs on their property.
Of course, as with most things in your home, you should always read your policy before purchasing it to know what will and won’t be covered.
How to Get Loss Assessment Coverage
Most homeowners insurance policies provide loss assessment coverage. The only way to get loss assessment coverage is to buy the homeowner’s policy and not have a separate flood or earthquake policy. But if you dwell in a place where flooding or earthquakes are common, it might be worth getting a different flood or earthquake policy in addition to the homeowner’s policy.
Tips for Buying Loss Assessment Coverage
Of course, you must know what you are buying before you buy anything. So, before you decide to purchase loss assessment coverage, make sure to:
– see what the deductible is;
– research the COA’s master policy coverage (because the COA could have agreed on a very high deductible to get lower premiums);
– ensure the COA stays current on the premiums payments (the bylaws should allow this. Sometimes COA will not pay the insurance premium, letting the master policy lapse. This action could force owners to spend money and unexpected costs if an accident occurs. Some companies could spread the assessment across all the condo owners while others could divide the costs among the units involved.);
However, you could get this coverage as an inexpensive endorsement of your present insurance policy. It would cost you about $20 yearly while providing about $100,000 coverage limits.
– Research what the individual condo policy offers because the chances are it does not provide the necessary amount of loss assessment but only the minimum.
– Inform the insurance agent if there is some shared area, such as a swimming pool, where you could have some costly insurance claims.
– Ask the agency how much loss assessment coverage comes with your policy.
– Find out what the coverage limits are.
– Find out if there are some limitations and exclusions.
Why Is Loss Assessment Coverage Important, And Do I Need One?
The answer is simple: yes, you need a loss coverage assessment, which is significant because you cannot predict any accidents in your life. However, with this type of coverage, you can be safe no matter what accident occurs.
Severe types of accidents would cost you a lot of money to repair. Additionally, if the limits of the master’s policy are exceeded, the inhabitants will have to pay the difference together. In case of an uncovered accident, loss assessment coverage will protect you in terms of finance.
Of course, loss assessment coverage is not obligatory and is not required as an add-on to your condo or insurance policy.
But it can be beneficial in times of unexpected disasters. Since this coverage could include personal liability incidents if you have a shared area, vandalism to the exterior of the building, or damage to the shared interior spaces in times of fire or another disaster, you should seriously consider it.
All the natural disasters could cost a lot to repair – this is a fact..
How Much Does It Cost?
Most often, your condo insurance policy already has the loss assessment coverage of up to $1000. Also, most countries allow you to increase the coverage amount (known as ‘add-on’).
How much this coverage will cost you depends on how much you need. Any special assessment can be a small or more significant expense of thousands of dollars. And how much you need depends on your condo’s potential dangers.
To review the dangers, you must look through your HOA master policy. Why?
Because this is how you see what HOA is responsible for in times of danger, what coverage limits they offer, and if they provide special deductibles for special occasions.
Most add-ons range from $10,000 to $100,000. Different companies offer different coverage limits, but these are always between the above-mentioned numbers. To clarify, purchasing the $100,000 coverage would mean paying no more than $75 a year.
Although loss assessment coverage is not a must and is only optional, an increasing number of homeowners choose to add it to their policy. This coverage is additional protection to your homeowner or condo insurance if you live in communities like condos or HOA.
With this coverage, you will not have to worry about any damages in the common areas where you live or if there is any personal injury claim against the condo association. Anybody who lives in such a community should consider adding this endorsement to their insurance policy for more protection and peace of mind.
So, check out our site for more information and feel free to contact us at (301) 431-0000 or schedule an appointment with our team if you’d like to know more about loss coverage. Here you can find some of the questions answered.
What Does Loss Assessment Coverage Help You With?
Loss assessment coverage is an optional insurance policy that could protect condo owners against liability when a common area loss occurs. The loss could refer to damage to a common area, damage to outer building parts, or a personal injury claim against a condo association.
Does The Umbrella Policy Cover Loss Assessment?
No, the umbrella policy covers only claims against the unit owner. These are direct claims that go against the owner for their liability.
Are Loss Assessment and Special Assessment The Same Thing?
Yes, more or less, these are two terms for the exact definition. Loss or special assessment is there to protect you against assessments by the homeowners (when the master policy does not cover the whole claim).
Is Loss Assessment Coverage Obligatory?
No, it is an optional endorsement. You can add it to your insurance policy or not; it is your choice. This coverage benefits those who live in a shared community (condominium or homeowners association), where you could be responsible for damage or loss in a common area.