If you live in a condo it is likely that you have a homeowners association (HOA) as an insurance policy which will cover things that happen in the common areas (areas outside of your personal unit). If so, they why would you need loss assessment coverage? There are times when you will need it and actually when you will be thrilled to have loss assessment coverage.
Living In a Condo Vs Renting an Apartment
Often, condo life seems similar to apartment life. However, in an apartment, the common and structural parts of the apartment building are owned by the landlord. The landlord or building management company is responsible for any damage to those shared areas including the building itself. In a condo, this is not true. The resident owns their own personal section of the condo, while all residents own and are responsible for the rest of the property jointly.
What is Loss Assessment Coverage?
Loss assessment coverage is for an individual whose HOA policy might be less than satisfactory. For example, if a common area sustains damage resulting in repair costs exceed the HOA minimum, the residents are required to split the bill. For instance, say a fire damages part of the building and it will costs 1.1 million to repair the damage. If the HOA policy only covers 1 million, then the remaining $100,000 will be split between the condo owners. Depending on how many owners there are, this could be a significant cost. For instance, if 50 owners split the $100,000 they would each be responsible for $2,000 out of pocket. This is why loss assessment coverage was created.
Common Areas
Here is a list of areas which are usually considered common in a condominium. These are areas which if damaged, would use the HOA, and potentially, the loss assessment policy.
- Lobbies
- Corridors, hallways, and stairways
- Swimming pools, gyms, and other athletic facilities like tennis courts,
- Washing machines or laundry room
- The roof of an apartment building
- Elevators
- Washrooms in lobby area
- Driveways, parking lots, ramps, the lot (where the development actually sits)
- Landscaping
- Store rooms
- Electrical systems, heating and air conditioning systems
- Plumbing systems
Consult your HOA policy to determine exactly what your condo considers a common area.
Reasons You Will Need Loss Assessment Coverage
Of course with insurance it’s good to have, but will you ever need it? Hopefully not, but there are several scenarios in which having loss assessment coverage will be a good thing.
Common Area Damaged
If a pipe bursts and damages several common areas like a gym, lobby, and washrooms, it is possible that the HOA policy will not cover the costs in totality. In this case, the condo owners bear the responsibility to foot the remaining bill.
Weather Damage
One example of this would be if a weather event has caused damage to the outer part of the building. As with the common area damage, if the cost of repairing the damage is greater than your HOA policy, the remaining cost would be split between the condo owners. Your Loss assessment coverage is designed to protect you against having to provide your portion out of your personal finances.
Injured Person
If someone is injured in a common area like a pool or other recreational area there medical bill is the responsibility of the HOA. Any additional costs would be covered by loss assessment coverage.
These are three of the most common scenarios in which loss assessment coverage could save condo owners a lot of money.
How Much Coverage Do You Need?
You should take a close look at your HOA master policy. This will detail how much is already covered and what your condo’s common areas are. As these circumstances are not exactly predictable, it is somewhat of a gray area. Just pick a policy amount which will be enough to help you, but whose premiums won’t affect your monthly budget too significantly.
For more information about loss assessment coverage for condos or if you would like to review what specifically your Home Owners Association insurance policy covers, contact the experienced professionals at TJ Woods Insurance Company, Worcester, MA today for help. We also offer condominium insurance, renter’s insurance, and home owners insurance as needed.
