Keller Williams Greater Seattle

Condo Insurance Loss Assessment Coverage

By on July 1, 2012 in Feature, Real Estate with 4 Comments

A discussion arose recently regarding coverage for “special assessments”, which a number of Seattle area condo owners are currently facing. The gist of the conversation was a few people with whom I was speaking with were under the belief that condo owners can obtain insurance coverage to cover their portion of an imposed special assessment. That’s true to a point, but not as clear cut as it may appear.

Virtually every condominium owner’s insurance policy (HO-6), not to be confused with the condo’s master insurance policy, provides for a minimal amount of Loss Assessment coverage, usually $1,000. The Loss Assessment coverage covers a portion of the policy holder’s share of a special assessment, which may include their share of the master policy’s deductible of a covered loss, or their share of damages that exceed the master policy’s coverage limit (e.g. liability resulting from an injury on the property).

For example, someone is seriously injured in a condo building and is awarded $1.5 million in damages. Most master insurance policies only include $1 million in liability coverage, therefore, the association assesses the remaining $500,000 among the owners. Let’s say it’s a 100-unit building and you’re one of the owners…that’s a $5,000 assessment you’ll need to pay. Loss Assessment coverage can help you cover that.

Most insurance companies provide condo owners the option to increase the Loss Assessment Coverage up to $50,000 for about $25 per year (will vary by company). It’s a small premium for a lot of coverage.

However, there are limitations. Not every company will allow Loss Assessment coverage to cover an owner’s portion of the master policy’s deductible. More importantly, though, Loss Assessment coverage only covers an owner’s share of a special assessment arising out of a loss from a covered peril. Generally, as a rule of thumb, if the underlying problem is not covered by insurance, then Loss Assessment coverage doesn’t kick in.

What does that mean? Special assessments arising out of deferred maintenance, water intrusion damage, defects or systems that outlive their useful life are NOT usually covered. Unfortunately, most of the special assessments that are levied arise from these types of issues.

Nevertheless, it is an inexpensive coverage that can offer considerable financial protection for condo owners. Every company will approach Loss Assessment coverage differently and condo owners should speak with their insurance agent to determine what is covered by their HO-6 condo owner’s policy.

© 2012 Seattle Condos And Lofts

Tags: ,

About the Author

About the Author: Ben Kakimoto is a condo marketing specialist and publisher of The Seattle Condo Blog. Ben's focus is urban residential properties in Seattle's metropolitan core. Contact Ben to learn more about the Seattle condo and loft real estate market. Find Ben on Google+, Twitter and Facebook. .


If you enjoyed this article, subscribe now to receive more just like it.

There Are 4 Brilliant Comments

Trackback URL | Comments RSS Feed

  1. Miriam Miller says:

    I have been assessed $ll,000 for my EPIC condo unit. I have lived here
    for 6 years. The Board was not elected, and I have not been provided the
    breakdown of the assessment. The majority of the occupants of the units
    are not owners, but renters from owners who are not on the premises or even
    in the country. Kappes Miller has not prevented damage to the garage
    and flooding, the theft of computers and paintings, the destruction of
    fire extinguishers at all parking levels, damage to the box of units for
    entrance, cobwebs in the stairwalls. The owners who are occupants here
    were assessed $ll,000 to make up for those owners who are not on the premises.

  2. Ben Kakimoto says:

    HI Miriam, sorry to hear about your experience from your HOA and the management company. The HOA and the PM company will have detailed information about the special assessment, and as an owner you are certainly entitled to that.

    All owners, not just those who are occupants, will be assessed for the upcoming repairs to the building. Please contact the board president and/or secretary and the PM company for more information regarding the assessment. It’s my understanding the repairs and assessment has been under consideration and research by the HOA for several years.

  3. Tony says:

    We have a condo in a complex that is investigating water intrusion and faulty building practices. Thinking an assessment, probably a special assessment is on its way in a year or so(?). Looking into our coverage, the company said they do not have Special Assessment coverage and instead sold us on more Loss Assessment. Do I, can I, go elsewhere and buy a Special Assessment coverage from a different company?

  4. Ben Kakimoto says:

    HI Tony,
    Thank you for your comment and sorry to hear about the upcoming assessment at your condo. Usually, “Loss Assessment” and “Special Assessment” mean the same thing and are interchangeable.

    I do not believe insurers will typically offer Loss Assessment coverage without the underlining condo-owners (HO-6) policy, but that will likely vary by insurance companies.
    – Ben

Post a Comment

Your email address will not be published. Required fields are marked *