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Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in . Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way. Homeowners associations (HOAs) are common for people who live in a condominium, townhome or single-family home. The association takes care of maintenance of common areas, services and amenities within the community. Each homeowner or condo owner pays fees to cover use and maintenance of common areas. When damage occurs in the common areas or someone gets injured there, the cost for repairs and medical expenses are typically passed onto the association members. In this scenario, having loss assessment coverage on your individual home or condo insurance policy would cover the damages so you are not directly responsible for the cost. Compare rates and save on home insurance today! Get quotes Close X This advertisement is powered by Coverage.com, LLC, a licensed insurance producer (NPN: 19966249) and a corporate affiliate of Bankrate. The offers and links that appear on this advertisement are from companies that compensate Coverage.com in different ways. The compensation received and other factors, such as your location, may impact what offers and links appear, and how, where and in what order they appear. While we seek to provide a wide range of offers, we do not include every product or service that may be available. Our goal is to keep information accurate and timely, but some information may not be current. Your actual offer from an advertiser may be different from the offer on this advertisement. All offers are subject to additional terms and conditions. Compare home insurance rates
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Return to form What is loss assessment coverage
Loss assessment coverage is an optional coverage most homeowners and condo owners can purchase as part of their home insurance policy. Although loss assessment is often associated with condo associations, any home or townhome located within a homeowners association may benefit from loss assessment coverage. When you live in a neighborhood that is part of a condo or homeowners association, the HOA takes out an , sometimes referred to as a master policy, to provide coverage for losses to the common areas and building. In a single family home development, the HOA’s master policy will typically insure common areas — such as the swimming pool, tennis courts, playground and amenity center — while a master policy for condos and some townhomes will also provide coverage for the residential structure but not individual units. Even though HOAs have a separate insurance policy, there are instances where members may be required to pay some of the expenses that are not covered under the HOA’s master policy, in the form of a special assessment. Loss assessment coverage helps protect members from paying these additional expenses themselves. What is covered under loss assessment coverage
Although the details of a loss assessment coverage will differ from provider to provider, most include protection from three kinds of losses. Damage assessments
When a common area in an HOA is damaged by a covered peril, the HOA’s master policy typically covers the damages. If the cost of repair exceeds the limit of coverage in the master policy, however, the HOA may assess members and require them to pay the difference. If the damages cost more than what the master policy will pay for, loss assessment coverage in an individual condo or homeowners insurance policy could cover the cost assessed to members. Usually, HOAs will divide the remaining cost evenly between HOA members, but not all HOA bylaws or master policies are the same. Read the details carefully when joining the association so you know what to expect if this situation ever happens to you. If the master HOA policy is unclear, ask your association to clarify any areas that are confusing. You should request a copy of the master policy so that you can review it with your insurance agent before determining what individual coverage you need to purchase. Liability assessments
When someone is injured in a common area of a residential development, such as the amenity center, parking garage, playground, swimming pool or tennis court, they might choose to sue the HOA for damages. The HOA master policy typically has coverage for these instances. Once again, though, the cost of the settlement could be more than the liability limit in the master policy. If liability damages that the HOA is held legally responsible for exceed the policy limits, members may be assessed for the remaining cost. The loss assessment coverage on your homeowners or could protect you from having to pay these costs out of pocket. Deductible assessments
When an HOA purchases a master policy, it also needs to choose a deductible amount for each coverage. A is how much the policyholder, which would be the HOA in this case, will have to pay out of pocket when a claim is filed. If the HOA’s common areas are damaged and the HOA has a high deductible, the cost of repair may be less than the deductible. In this case, the master policy will not cover the damages and the HOA might assess members to pay for the costs of repair. The HOA may also place a special assessment on owners for having to pay the deductible, even if the claim is fully covered by the master policy limits. Loss assessment coverage can help to protect members from deductible assessments by paying the member’s share of the cost up to the limit of the coverage. Do I need loss assessment coverage
Loss assessment coverage is something to strongly consider if you own a condo or if you buy a home or townhome in an HOA community. People who choose to join HOAs can be liable for damages that are no fault of their own, and buying loss assessment coverage can protect HOA members from taking a financial hit when an assessment occurs. typically offer different limits of coverage for loss assessment, ranging from $1,000 up to $100,000 or more. According to the Insurance Information Institute, purchasing a $100,000 limit on loss assessment coverage typically costs less than $75 annually in additional premium. When deciding how much loss assessment coverage to buy, look at the HOA’s master policy to see how they handle assessments and specifically how those assessments will affect members. If an HOA needs to assess members for an uncovered loss, the HOA will usually divide the cost evenly between members. If the HOA has many members, the loss assessment per owner would be less compared to an HOA with fewer members Consider this scenario when determining if loss assessment coverage is right for you and how much to purchase. If a storm causes $500,000 in damage to the amenities in a shared area and an HOA master policy only has $400,000 in coverage, there is an excess of $100,000 that would likely be assessed to the homeowners. If the policy has a high deductible of $25,000, the association may also assess the cost of the deductible among the owners in the community. Loss assessment coverage could help you to cover the cost of your share of the assessment. How to buy loss assessment coverage
Loss assessment coverage is offered by most home insurance providers. When signing up for a condo, townhome or homeowners insurance policy, loss assessment will typically be offered by the provider as an optional coverage that can be added to your policy as an endorsement. When deciding how much coverage to purchase, consider the number of people living in the HOA and what kind of common areas are provided by the HOA, like swimming pools, playgrounds and other places people may get injured or could be costly to repair. These factors could increase the chances of an assessment and increase the amount of that assessment. Frequently asked questions
How much loss assessment coverage do I need
If an HOA needs repairs that far exceed the master policy’s coverage limits, members could end up paying a lot of money in the form of a special assessment. Being assessed for guest injuries or other damages are also reasons you may purchase loss assessment coverage. Take these factors into consideration when purchasing loss assessment coverage, which is generally affordable even at higher limits.
What are loss-based assessments
When a HOA is found to be liable for a loss covered under the master policy, that policy will pay up to the limit of coverage. If the loss exceeds the limit of coverage or if the master policy has a high deductible, the excess loss and deductible cost passed to members is a loss-based assessment.
If a guest slips in the pool and sues the HOA am I liable for damages
If the guest wins the lawsuit and the HOA has to pay damages that exceed the limits of coverage in the master policy, the HOA could assess members for the remaining cost. In this case, having loss assessment coverage in place ahead of time could help mitigate the financial burden of the additional expenses incurred in settling the suit..
What is the triggering event for a loss assessment claim
The triggering event for a loss assessment claim is receiving an assessment letter from your HOA. When you receive the assessment, you can submit it to your insurance company if you have loss assessment coverage. If approved, your home insurer would pay the assessment fee. If you do not have loss assessment coverage or it is not a covered assessment, you would have to pay the assessment amount out of pocket. SHARE: Mandy Sleight has been a licensed insurance agent since 2005. She has three years of experience writing for insurance websites such as Bankrate, MoneyGeek and The Simple Dollar. Mandy writes about auto, homeowners, renters, life insurance, disability and supplemental insurance products. Mariah Posey is an auto and homeowners insurance writer and editor for Bankrate.com. She aims to make the insurance journey as convenient as possible by keeping the reader at the forefront of her mind in her work. Mark Friedlander is director of corporate communications at III, a nonprofit organization focused on providing consumers with a better understanding of insurance. Related Articles