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Coverage Spotlight: Loss Assessment
By: Jaci Buscher | Date June 1, 2014
Condo owners and those with an active Homeowners Association, listen up! You probably have your basic insurance, at least we hope you do, that covers your personal property as well as any damage that may occur within your own personal unit. But have you ever thought about purchasing loss assessment coverage? This coverage can protect condo owners and homeowners, in the case that they would have to pay for claims that exceed the insurance limits provided by the HOA's policy. By active HOA, we are referring to whether or not there is an entity that provides any type of underlying insurance on your property or common areas in your community. This underlying insurance covers any damage or injuries which occur in common areas within and outside your building, but only to a specified limit. In the following examples, condos are used to highlight situations in which homeowners may be responsible for paying claims that exceed HOA limits; however, be aware that such scenarios could apply to anyone with an active HOA, not just condo owners.

Scenario 1: In the case that severe weather, say a tornado, caused severe damage to the exterior of the condo units, the HOA's insurance policy would be responsible for paying. However, if the HOA's insurance has a limit of only $500,000 but there is $600,000 worth of damage, then the excess $100,000 would be split up and charged to each of the condo owners. If there were only 50 condo owners in the building, then each person would have to pay $2,000.

Scenario 2: Similarly, if one of the condo owners or their guests were injured in a common area of the building, then the HOA's insurance policy should cover the loss. However, in the case that the person was seriously injured the condo owners could be responsible for paying any costs that exceeded the HOA's liability limits. Such injuries would include a fall on the pool deck, a slip on an icy sidewalk, or a trip on the hallway stairs.

Scenario 3: One of the primary differences between a condo and an apartment is that the interior, common parts of an apartment are owned, and thus insured, by the owners of the apartment building. However, in a condo, those places are jointly owned by all of the condo residents. Therefore, if a fire, explosion, or even a disrespectful stranger causes damages to those areas, the condo owners are responsible for covering the costs to repair it.

In all of these cases, loss assessment coverage can prevent the owner from having to pay the excess charges out of pocket. To know whether or not this coverage is beneficial for you, you first want to take a look at your HOA's master policy and then talk with us to determine the likelihood of a loss exceeding your HOA's policy limits.