What is Condo Loss Assessment Coverage?

You've just moved into your new condo. You're loving the amenities, including the pool, fitness center, hot tub and tennis courts. You've purchased a personal condo insurance policy to protect your belongings, and you're confident that your Homeowners Association (HOA) will not only cover the maintenance and upkeep of these amenities but will also cover the claim costs associated with major and minor damage to common areas.

Here's where you may be surprised. While your HOA maintains its own policy (called a "master policy"), something could still happen where the HOA assesses the community of owners, and the condo owners could be responsible for the costs. That's where loss assessment coverage comes in; it can save the day... and your bank account.

Loss assessment coverage is an add-on to your condo insurance policy that comes in handy when the community of owners is responsible for unexpected damages. Here are a few scenarios that could cause a loss assessment to be activated:

• Someone has been hurt in a common area.
  Whether you personally know this individual or not, the fact that they were injured on the condo property may result in an extra strain on your personal finances. You'd probably assume that the medical costs associated with the injury would be covered under the HOA's insurance policy, but the injury bill could exceed the HOA liability limit. In this case, because the injury happened in a common area, you have partial responsibility for making up the difference between the actual medical bills and the HOA liability limit. That means you and your fellow condo dwellers could be assessed. Condo loss assessment coverage will help you avoid paying out of pocket if this situation arises.
• There has been a major catastrophe - like an earthquake, tornado or hurricane - that has damaged the outside of the building.
  Often times, storm events like this come with a high deductible that must first be paid before repair of the damages can begin. And some HOA master policies dictate that the deductible is the responsibility of the condo owners. Contributing to this extra charge could be a strain on your personal finances if you didn't have condo loss assessment coverage. Associations could charge a special assessment to cover this master policy deductible cost.
• The shared property inside the building has been damaged by a fire, and the cost to repair has exceeded the HOA policy limits.
  Since you and your fellow residents jointly own the common property, you could be asked to shoulder part of the cost to repair. Even if you do not use the shared property that's inside of the building (including elevators, fitness room equipment, hot tub, etc.), you could still be found responsible for a portion of the cost.