Loss assessment on Condo Policies is becoming increasingly more important. Because the wind and hail deductibles for the HOA’s master policy have gone to percentages and that is going to mean there is not enough money in their reserves to cover a hail loss.

When you live in a HOA, losses can be association wide. When a loss occurs that is greater than any reserves the HOA has set aside, the association then assesses the unit owners. Your HO 6 condo policy would then need to respond to this assessment. HO 6 policies come with only $1,000 of loss assessment coverage. Even if you increase the overall coverage on the policy, the loss assessment stays at $1,000.

This is also true when it comes to liability. Let’s say that someone is injured at the pool and sues the HOA. If the judgment exceeds the association’s general liability coverage, every unit owner gets assessed for the excess amount. Or what if a unit owner’s negligence causes a fire that damages multiple units and exceeds the HOA’s property coverage? Again, all owners share the assessment.

We recommend that you upgrade your HO 6 structural perils from basic to special perils. We also recommend that you upgrade your personal property perils from basic to special perils as well. As a unit owner you have no control over the maintenance of the exterior of the building. Consider an older building where the roof starts to leak. That water can damage your carpet, hardwood floors, cabinets, furniture and more. Without upgraded perils coverage, you may have no coverage for these interior losses.

According to most HOA declarations, the unit owner is responsible for everything inside the bare walls and bare floor of the unit. Here is a sample of the exposed items that the unit owner would be responsible for:

• Flooring (all types) – $25,000
• Wall coverings – $5,000
• Lighting fixtures – $5,000
• Plumbing fixtures – $12,000
• Built-in appliances – $5,000
• Kitchen cabinets – $20,000
• Owner-installed improvements – $30,000
• Previous owner improvements – $20,000

Total Estimated Replacement Cost: $122,000

As you can see, the basic $1,000 of loss assessment coverage is simply not enough for this level of exposure. We strongly recommend increasing your loss assessment coverage and upgrading your perils to special perils on your HO 6 policy.

Keeping you protected,
Rick Cline

Published: February 7, 2018