The Importance of Loss Assessment Coverage
When it comes to insuring condo units, it is important to protect not only the condo unit itself, but also any common areas and property within the community. These common spaces are usually maintained using association dues — planting flowers, mowing the lawn, removing ice and snow, etc. — and include community pools, clubhouses and gyms.
A condo owner can be (and often is) held liable for a loss that takes place in a common area. It is estimated that there are over 11 million condo units in the U.S., which means coverage for these common areas — called loss assessment coverage — is more important now than ever.
Loss assessment protects an insured from being held financially responsible for property or liability losses that occur on a shared or common property. USLI’s Condominium Unit Owners product includes $1,000 in loss assessment coverage, and that limit can be increased up to $50,000.
Potential losses include damage to a condo building’s exterior by a covered peril such as fire or a covered cause of loss impacting a shared area such as a fitness center. Loss assessment can even be used to cover bodily injury losses occurring in a shared area such as a parking lot. To determine the amount of loss assessment needed, an insured should seek information from their condo master policy and bylaws.
When a condo association’s master policy does not have limits high enough to cover a loss, unit owners can be assessed equally for the portion of the loss that is not covered. This is where loss assessment coverage comes in: The insured can use their loss assessment coverage rather than pay the assessment out of pocket.
Consider this example: If a fire damages a gym within a condo building, the condo association’s master policy will be responsible for repairing the damage; however, if the master policy’s limits are exhausted by the claim, the association would assess an equal portion of the remaining loss to each unit owner. So, if there are 10 units and $100,000 in damages after the master policy is exhausted, each unit owner would be assessed $10,000.
There are some things loss assessment doesn’t cover, however, such wear-and-tear or overall maintenance repairs to a common property that are assessed to each unit owner. For example, if a parking lot is old, cracked and in need of replacement, the cost would not be covered under loss assessment coverage. There must be a cause of loss to trigger loss assessment coverage.
Many carriers consider the master policy deductible to be the association’s responsibility — they selected it, after all — and will cap the payout toward it at $1,000. USLI doesn’t want your insured to face this gap in coverage, though, so our Condominium Unit Owners product allows insureds to apply the entire loss assessment amount to a master policy deductible for a covered cause of loss.
As always, thank you for your support and business.
The Condominium Unit Owners product is not available in AK, AL, CA, FL, HI, KY, LA, MS and WV.
Contact Mark Adelsberger,
Underwriter – Renewal | 888-523-5545, ext. 2253
Written by Lisa Spitko
September 5, 2019