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Loss Assessment Coverage

What is loss assessment coverage? It is one of the most overlooked coverages on a condo/townhouse policy (also available for regular homeowners policies).

If you live in a condo/townhouse where you are not responsible for the exterior walls and roof upkeep, the homeowners association will have a master policy that covers the building(s) and liability. To save money, many condo/townhouse associations are now raising the structural deductible to $5,000 on the master building policy. Many condo/townhouse policies will have $1,500 in loss assessment coverage automatically. In a medium size claim, that will not be enough. If your neighbor’s water heater in the wall leaks into your unit, the $5,000 deductible must be met. The additional loss assessment coverage can cover the deductible for you.

The most common claim that the loss assessment coverage responds to are liability claims from injuries in the common areas. Example, someone gets hurt in a common area, i.e. picnic area or pool. The injured party successfully sues the HOA for $1.5 million which is $500,000 over the HOA’s master liability limits. This leaves a balance of $500,000 to be divided among say, 20 condo/townhome owners. The condo/townhouse owners now are on the hook for $25,000 each. The loss assessment coverage would respond and cover that for the condo/townhouse owner who has that coverage.

Another common claim that loss assessment coverage will respond to is damage to the building that exceeds the coverage on the master homeowners association policy. As in the prior example with the liability claim from the common area, each unit owner would be assessed for an equal amount to cover the shortage. The cost of loss assessment coverage is very inexpensive, usually about $20 per year. If you are a condo/townhouse owner, be sure to look over your policy and have it added if you don’t have it. It is a very inexpensive coverage and it makes no sense not to have it.

Tracey L. Wells
Farmers Insurance – Wells Agency
2402 Loganville Hwy, Ste 300
Grayson, GA 30017