What's Protected in Loss Assessment Coverage for Condo Unit Holders (HO 6)?

Updated: Dec 9, 2020

Circumstances could arise that may leave the condo unit holder footing the bill to repair or replace items in common areas.

It is important to remember you still may need protection for everything outside your individual condo unit when you purchase a condo. Typically, your condo Unit Owners Insurance Policy (HO 6) only protects your unit and the contents inside.

Your Homeowners Association Master Policy (HOA) covers major and minor damage to common areas, which can include everything from a gym, pool, staircase, lobby, elevator to a roof. Even though your homeowner’s association maintains its own policy, you could be assessed an unexpected bill at any time.

That is when loss assessment coverage can come in and save the day! Loss assessment coverage is not a required add-on to your (HO 6) condo unit insurance policy. It is crucial to review your Homeowners Association Master Policy limits to see how much coverage it protects.

Loss assessment coverage is an endorsement that works in addition to the Homeowners Association Master policy. It provides protection to condo unit owners when the building or common areas have been involved in a claim. It covers the remaining out-of-pocket expenses — due to qualifying perils — that were not covered under the Homeowners Association Master Policy.

Although purchasing loss assessment coverage may not be at the forefront of your decision-making process when buying a condo, you may quickly realize how valuable it is.

Let us say a severe windstorm rolls in and damages the roof and siding to your condo. The Homeowners Association Master Policy covers $1 million in damage, but the repairs quickly total up to $1.1 million. Who pays the remaining $100,000? You guessed it; the condo unit owners are responsible for the remaining expenses.

Now let us say you live in a 100-unit building. That $100,000 is then divided among the 100 owners to pay. Now you are stuck with a $1,000 bill that you are legally required to pay. That money can either come out of your pocket, or loss assessment coverage.

Things like elevators, hot tubs and gym equipment can make for a comfortable living. They can also make for costly repairs or replacements that are not fully covered under the Homeowners Association Master Policy.

If a fire or another covered peril damages or destroys anything in the common area, the Homeowners Association Master Policy will handle any amount up to its coverage limits. If the cost to repair or replace the property exceeds the maximum coverage, you and your fellow condo unit owners are responsible for paying the difference.

While you may not use or even want those shared items, you are still responsible for a portion of the cost. Loss assessment coverage can help pay those bills.

Injuries happen. We hope they never do, but they do. Even though your Homeowners Association Master Policy maintains liability coverage, medical bills could exceed the maximum amount on the policy, which leaves the residents picking up the payments for someone they may have never met.

They are not your guests, so why should you be responsible? Unfortunately, even though you did not invite them, you are still partially responsible for anything that happens to guests in common areas of the property.

Since Homeowners Association Master Policies are typically all-encompassing and expensive, deductibles can lead unit owners to dishing out a chunk of change when an assessment has been made. Loss assessment coverage can pay for your portion of the deductible.

Hopefully, this article will encourage you discuss Condo insurance with your independent insurance agent/broker. They can help you, but it is your responsibility to choose the insurance that is best for you.

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