You have a Condo or HOA insurance policy to protect against property and liability losses that take place within your property but what happens if any of the following occur?
- Damage to the Building
- Damage to a shared area of the property, such as a Clubhouse
- An injury occurs in a shared area
The community association’s master policy provides coverage for property and liability losses that occur in common areas throughout the property such as the clubhouse, pool and lobby. The amount of coverage under the master policy, however, may not be enough to cover a claim, resulting in a loss assessment against all unit owners. There are a number of reasons for a potential shortfall in the coverage available under a master policy: The community association board did not purchase an adequate amount of insurance, a significant deductible is applicable before a covered loss is paid and, as is often the case with construction projects, the cost of rebuilding and the timeframe for the work exceed the initial proposal, or current building regulations require additional work to bring the structure up to code.
In the event the coverage under a master policy falls short after a loss, to help protect unit owners, loss assessment insurance is available with HOA policies. This coverage applies to those loss assessments arising out of perils covered under a unit owner’s policy.
Yet even with loss assessment coverage you could find yourself stuck with a significant bill if you don’t have the right policy with the right insurer. Most standard (direct writers) and middle market insurers only offer $1,000 in loss assessment coverage, which often doesn’t begin to meet the assessment fees that unit owners could potentially face after a loss. For example, let’s say a fire in your community’s clubhouse results in a total loss of $1.5 million. The master policy carries $1 million in property damage coverage. In this case, the HOA will assess the extra $500,000 for the repairs, to be divided among the unit owners. If you live in a 50-unit building, that’s $10,000 (or perhaps even more if the assessment is scaled, based on the square footage of each unit) you would have to pay out of pocket either as a lump sum or in increased monthly fees.
The insurers with which we partner offer policies tailored to high-value properties and automatically provide $50,000 in loss assessment coverage for our insureds, with higher limits also available. The policies we secure are designed to address the real-world assessments for which unit owners could potentially be responsible after a covered loss. We want to ensure that untimely damage doesn’t put unexpected strain on your personal finances.