What happens if the HOA's insurance is insufficient?

Your loss assessment coverage can help cover your share of costs that exceed the HOA's coverage limits.

When you live in a condo or townhome, your Homeowners Association (HOA) typically carries a master insurance policy that covers damage to the building's exterior and any shared spaces, like lobbies or swimming pools. However, there are times when a significant event, like a natural disaster or accident, causes damage that exceeds the insurance coverage limits. In these cases, the HOA may need to levy a 'loss assessment' on all unit owners to make up the difference. This is where 'loss assessment coverage' comes into play. If you have this add-on as part of your personal condo insurance policy, it can help pay your share of this unexpected cost, ensuring you're not caught entirely off-guard financially.

Imagine your condo building suffers severe damage from a hurricane, requiring extensive repairs. The HOA's insurance policy covers up to $2 million in damages, but the total repair costs amount to $2.5 million. The HOA, being $500,000 short, splits this amount among all the condo owners as a loss assessment, which comes to approximately $10,000 per owner if there are 50 units. If you have loss assessment coverage, your insurance can cover you for this $10,000 charge, as opposed to having to pay it out of pocket.

It's wise to review your personal condo insurance policy to ensure it includes loss assessment coverage. This safeguard can be incredibly important during unforeseen and costly events. Speak with your insurance agent to understand your current coverage and consider if additional loss assessment coverage might be beneficial for your peace of mind. Keeping informed about both your HOA's insurance policy limits and your personal coverage can save you from future financial burdens.