2024 Must-Know Tips: Understanding Loss Assessment Coverage

Loss assessment is a fee charged by a homeowners association or condo association to their members. The assessment occurs typically when there is damage to common areas. The association calculates the repair costs and assesses the individual members for their portion. Often times this occurs when there are a large amount of damages from perils like a Hurricane or Large Fire or Large Water Loss.

If a policy has loss assessment coverage, there a few important aspects to note and review:
· The adjuster will need to have documentation from the association that identifies
the following (this is typically directly provided by the association in the loss
assessment paperwork):

· When the assessment occurred

· What the assessment costs are (detailed out)

· What the damages/assessment comprises of

· What the underlying peril or cause was

Loss assessment coverage is typically capped in the amount of coverage available. The cap is specifically stated in the policy.

· The capped amount is all that is available regardless of the number of loss
assessments for the same direct loss to the property. Even if an association decides to
assess multiple times for the same underlying loss, it does not increase the cap.

· The loss assessment coverage only provides coverage when the underlying peril that caused the damage is a covered peril under the policy. Loss assessments for maintenance, renovations, upgrades, remodeling, or other non-covered perils are not
covered.

· Important note: sometimes associations will combine damages. In these cases, the loss assessment only covers the portion attributable to a covered peril under the policy.

· If the association is charging a loss assessment for the association’s deductible portion, this often has a sub-limit for that portion. It is important to review the specific policy language as it pertains to the association’s deductible.

· The amount of coverage for loss assessment is designated by the policy capped limit. An important factor in this is that it triggers back to the coverage applicable 1 day before the underlying direct loss occurred. What this does is prevent an individual to know damages occurred, anticipate a loss assessment coming from the association, and then purchase higher limits.