Loss assessment coverage

What is loss assessment coverage?

Loss assessment coverage, sometimes called special assessment insurance, is often included in condo insurance as well as homeowners and landlord policies. It provides protection for property owners when they’re held financially responsible for shared property repair costs or damages.

Let’s unpack that a bit.

Say you own a condo in a high-rise building and belong to a condo association. There’s a fire in your courtyard, which is an area you share with all the condo owners in your building. Your condo association’s master insurance policy covers damage to shared spaces like this, but unfortunately, the repair costs exceed that policy’s coverage. 

In this situation, the association can require all its condo owners to chip in to help cover the excess costs. That’s called a loss assessment, and loss assessment coverage is what helps you pay for your share of the unexpected expense.

The tricky thing about loss assessments is that they can pop up when you least expect them. That’s why it’s a good idea to check if your insurance has this coverage. Kin members in Florida don’t have to worry. State law requires that condo policies and homeowners policies come with $2,000 in loss assessment insurance.

Members in states where we offer House & Property insurance also have access to coverage for  loss assessments in their policies, as do homeowners and landlords in Louisiana.

Want to see how much a policy with that kind of quality coverage might cost you? Get a quote by entering your address.

What loss assessment insurance covers

Loss assessment coverage offers three main types of protection. It covers:

• Damage to common property

• Liability in common areas

• Deductible assessments

Let’s look at each in more detail.

Common property damage assessments

If your condo association’s master coverage isn’t enough to pay for damage to shared property, the excess often results in a loss assessment. That applies to damage to:

• The building itself.

• Lobbies.

• Hallways.

• Courtyards.

• Fences.

• Gyms.

• Tennis courts.

• And more.

Loss assessment coverage only kicks in when the assessed property damage was caused by an event covered under your condo unit owner policy. That means it can cover an assessment for damage caused by fire, hurricane winds, theft, vandalism, and more. 

It can’t cover an assessment for damage caused by earthquakes, flood damage (unless you add on flood insurance), or any other peril your policy excludes.

So say your condo association’s gym was destroyed by hurricane winds. In total, the damage exceeds the condo association’s coverage by $10,000. Your loss assessment coverage can help pay for your portion of that assessment, subject to your deductible.

Liability assessments

Similar to property damage, your condo association’s master policy also covers injuries that happen in common areas. But if your association is held liable for a guest’s injury that exceeds the master policy’s coverage limits, you can be assessed for the excess.

For example, imagine someone slips and falls by your condo’s pool, and the victim sues the condo association for $1.25 million in medical expenses. Your HOA’s master policy caps out at $1 million in liability coverage. The remaining $250,000 would be divided among you and your fellow condo unit owners.

Your loss assessment coverage can help pay for your share of the personal liability assessment.

Master policy deductible assessments

Some condo associations have a master policy with a high deductible, and those can also be assessed. Let’s say your building’s master policy has a $20,000 deductible, and the common areas incur $100,000 in damage. The master policy covers $80,000 in damage, but your condo association is still on the hook for the $20,000 deductible. The association can pass the cost of the deductible on to unit owners.

Deductibles can play into loss assessments in other ways. If the master policy deductible is too high, smaller damages may need to be covered through assessment, too. For example, say there’s that pesky fire in the courtyard again, and it causes $10,000 worth of damage. If the master insurance policy’s deductible is $20,000, then insurance won’t cover this loss. Instead, it will likely be assessed instead.

For both scenarios, loss assessment coverage can usually help cover master deductible assessments.

It’s important to read your condo association’s bylaws to get familiar with master policy deductibles. Assessments can add up quickly, and you want to make sure you have enough coverage.

Worth noting: All loss assessments are special assessments, but not all special assessments are loss assessments. In other words, your HOA might issue a special assessment to cover maintenance, upkeep, or renovations that exceed the association’s reserve funds. Because these aren’t covered insurable losses, they aren’t loss assessments and aren’t covered by your insurance.

What loss assessments insurance doesn’t cover

Loss assessment insurance only applies to damage your individual condo insurance policy (called a “unit owners policy” in the industry) covers. That means it won’t cover damage caused by:

• Earth movements, such as an earthquake, sinkholes, and mudflows.

• Water damage from floods (unless you have flood insurance) sewer backup, or water seeping in through the foundation.

• Seizure or demolition by a government agency or public authority.

• General wear and tear.

Pay attention to that last point because you can face special assessments for general maintenance, and loss assessment coverage won’t cover it.

Who needs loss assessment coverage?

Condo owners are probably the first people who come to mind when you’re talking about loss assessment coverage. However, anyone who owns a home that’s part of a homeowners association (HOA) can also benefit from this coverage.

How to add more loss assessment coverage to your policy

Some amount of loss assessment insurance is already available in our policies, but your coverage limit may have to be in effect at least one day before an event causes a loss for your insurer to pay the amount you anticipate.

For example, let’s say you have $2,000 in loss assessment insurance but decide you need a $3,000 coverage limit, so you call your insurer to make the change. That same day, your condominium is hit by vandals who do enough damage to warrant a special assessment of $3,000 per unit owner. In this situation, your claim settlement is only $2,000, minus any applicable deductible.

Given this and the many circumstances that may call for loss assessments, it may be smart to increase your coverage. Luckily, it’s easy to do so.

With Kin, you can get an endorsement to increase your loss assessment coverage limits. Florida state law requires limits of at least $2,000, and the coverage has a $250 deductible. Other states may not require specific coverage limits.

Get a quote today to see how much additional loss assessment coverage costs on your condo insurance coverage.

How does a loss assessment work?

A loss assessment may apply when:

• The condo building is damaged

• There’s an injury in a common area

• Shared property (like fences, hallways, or courtyards) is damaged

But why do these losses become a shared responsibility for condo owners? It’s usually one of the following reasons:

• • Your association’s master insurance policy has a high deductible

  • Your association didn’t insure the building properly

  • Your association’s master policy doesn’t cover the loss

  • The loss exceeds your association’s coverage

After the value of the damage is determined, the cost is divided among all individual condo unit owners. Owners who have loss assessment coverage can make a claim on their policy to cover their owed portion.

Insurance companies often treat individual assessments as one single assessment if they originated from the same peril. In fact, in Florida, they’re required to do so. That means if a fire destroys your building’s courtyard, lobby, and hallways, and your condo association issues three different assessments, don’t be surprised if your insurer groups them together to streamline the claim. The total amount payable is the amount of loss assessment converge your policy has regardless of the number of times your association issues an assessment.

Want to see what loss assessment insurance costs when you work with us? Get a quick quote now.