What is loss assessment coverage?

This covers your share of assessments charged by the HOA for covered losses to common areas or liability claims that exceed the master policy's limits.

Loss assessment coverage is an important part of a condo or townhome insurance policy. Imagine you live in a condominium complex where certain areas like the gym, pool, or even the roof are shared by all residents. These are called common areas, and sometimes incidents happen that result in damage or require repairs. The condominium association often has a master insurance policy to cover these common areas and any liability related to them. However, if a loss occurs that exceeds the limits of the master policy, or if the deductible is very high, the Homeowners Association (HOA) might charge all owners a share of the costs to make up the difference. This is where loss assessment coverage comes into play. It helps pay your portion of such costs, meaning you won't be left paying potentially hundreds or thousands of dollars out of pocket when an unexpected event impacts the property in common.

Imagine your condo complex has a beautiful swimming pool that's enjoyed by everyone. One day, there's an unexpected fire in the pool house, causing significant damage. The total cost of damages exceeds the insurance limits set by the condo association's master policy. To cover the remaining costs, the HOA decides to assess all condo owners a portion of the expenses. If the pooled cost after the master policy covers its part is $100,000 and there are 100 units, you could be responsible for $1,000. If you have loss assessment coverage, your insurance could cover some or all of this charge, saving you from a hefty bill.

Check with your insurance agent to ensure you have adequate loss assessment coverage as part of your condo or townhome policy. It's a relatively inexpensive add-on that can protect you from unexpected financial burdens when your HOA imposes an assessment. Make sure to understand the terms and limits of this coverage, and consider increasing your coverage if you live in a complex with high-value common areas or if you think the risk of significant incidents is higher. Keeping this coverage up to date can provide peace of mind and safeguard your finances.