Loss Assessment Coverage: What It Is and When You Need It
Loss assessment coverage helps pay your share of condo or HOA repair costs when your association’s insurance falls short.
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Written bySarah Archambault
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Sarah ArchambaultInsurance Writer, Editor
Experienced personal finance writer
Background working with banks and insurance companies
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Edited byBecky Helzer
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Becky HelzerEditor
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Reviewed byJohn Leach
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John LeachLicensed P&C Agent, Chief Copy Editor
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
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Loss assessment coverage protects condo owners and homeowners association (HOA) members when the master policy isn’t enough to cover shared property damage or liability claims.[1] Standard condo insurance policies (HO-6) typically include a small amount of loss assessment coverage, but it may not be enough to cover repair costs after a covered event.
Some homeowners insurance policies also include this coverage, and you can usually increase the limits with an endorsement.
Here’s a closer look at what loss assessment coverage is, how it works, and how much coverage you may need.
What loss assessment coverage is
Loss assessment coverage is a type of insurance available to condo owners and HOA members. It helps pay your share of a special assessment charged by the condo owners association (COA) or HOA to repair damage to common property.[2]
After a covered event damages shared property, like a lobby or laundry room, your COA or HOA’s master insurance policy is supposed to cover the loss. But if the master policy falls short, condo owners and HOA members sometimes have to help pay for repairs.
Loss assessment coverage can help cover your share of a loss. Without it, you could be responsible for paying your portion of the special assessment out of pocket. Costs can add up quickly, especially for extensive damage.
Many of the best HO-6 insurance policies include a small amount of loss assessment coverage. But if it’s not included — or your coverage is minimal — you can add it as an endorsement. Some home insurance policies also include loss assessment coverage as an option.
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How loss assessments happen in condos and HOAs
Condo owners and HOA members typically have some shared responsibility for common property. So when the condo or HOA’s master insurance policy won’t pay in full for a covered loss to shared property, the association might charge owners a special assessment to raise the necessary funds.
Some common types of events that trigger assessments include:
Major storm damage: When damage from a covered event, like a major windstorm, exceeds the master policy limits, the COA/HOA may impose a special assessment to help fund repairs.
Fire in shared areas: If a fire destroys a common area, like a lobby or clubhouse, a special assessment might be needed once the master policy’s coverage limits are exhausted.
Large liability claims: Your COA/HOA’s master policy covers liability claims for accidents that happen in common areas. But if a claim exceeds the policy limits, condo owners and HOA members may need to contribute to pay for damages.
High master policy deductibles: If the association can’t cover the master policy’s deductible after a covered event, it may charge condo owners a special assessment to help pay the cost.
What loss assessment coverage pays for
Loss assessment coverage applies only when a special assessment is needed after a loss that’s covered by the association’s master policy. Consider this example:
A fire causes $150,000 worth of damage to a lobby in a condo building with 20 identical units. The COA/HOA’s master policy has a $10,000 deductible and a $100,000 coverage limit, leaving condo owners to cover $60,000.
The association divides the $60,000 among the 20 units and imposes a special assessment of $3,000 per unit. If your condo policy has a loss assessment endorsement, your insurer will likely reimburse your $3,000 share.
Generally speaking, loss assessment coverage can be used to help cover part of a special assessment for:
Damage to shared structures: Coverage can help pay for repairs when a named peril damages common property, like your building’s roof or pool.
Liability claims against the association: Your loss assessment insurance may help pay for liability claims if someone injures themselves on shared property, such as a damaged community swingset.[3]
Master policy deductibles passed to owners: In cases where condo owners and HOA members need to split the cost of a master policy deductible, your loss assessment coverage may pay for your share.
What loss assessment coverage doesn’t pay for
While loss assessment coverage can help pay for unexpected expenses passed along by your HOA or COA, it doesn’t cover all types of assessments.
Loss assessment coverage typically excludes the following scenarios:
Maintenance or wear and tear: Assessments for shared property, like landscaping or replacing broken laundry equipment, usually aren’t covered.
Improvements or upgrades: Loss assessment coverage can’t be used to pay for your share of assessments used to improve or upgrade common areas, like new windows or siding.
Assessments unrelated to insured losses: Your loss coverage only kicks in to help pay for assessments related to damage your master policy covers.
How much loss assessment coverage you need
The amount of loss assessment coverage you need as a condo owner or HOA member varies widely. Many standard condo policies include a base amount of loss assessment coverage, typically around $1,000. But you can choose to increase your coverage limit for added financial protection.
Without adequate loss assessment coverage, you’d have to pay your share of a special assessment out of pocket. Also, failure to pay a special assessment may result in serious consequences, like fines, restrictions on your use of common areas, and a lien on your property.
Higher coverage limits typically make sense if you live in an older building, your property has high-value common amenities, or your association’s master policy has a high deductible. Loss assessment coverage amounts generally range from $10,000 to $100,000, depending on the insurer.
The best way to determine coverage limits is to review your association’s bylaws and insurance documents or talk to your insurance company.
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How loss assessment coverage works with HO-6 insurance
A standard HO-6 policy covers the interior of your condo, your personal property, your personal liability, plus loss of use. Your coverage applies only to your individual unit, not common areas, and loss assessment coverage complements your existing HO-6 insurance policy.
Your association’s master policy protects the property’s exterior — including the roof — and common areas like hallways, elevators, lobbies, and pools. But coverage limits may be insufficient to cover major damage, such as a fire, and the association may charge you an assessment to help pay for repairs.
Increasing your HO-6 loss assessment limits can help prevent unexpected out-of-pocket assessments, while your HO-6 policy covers damage inside your unit.
How much loss assessment coverage costs
Loss assessment coverage is relatively inexpensive to add to your condo or homeowners insurance policy. It may increase your annual premium by $10–$75, depending on the insurer and the coverage amount.
Your exact loss assessment coverage cost is typically based on several key factors, like coverage limits, your location, and the type of condo or homeowners association. Talk to your insurance company or agent to review options and rates.
How to add or increase loss assessment coverage
Follow these steps to add or increase loss assessment coverage:
Review your HOA or condo association’s master policy and bylaws
Your association’s master policy document shows how much coverage is included, deductibles, and exclusions. Your community’s governing documents will also outline when the association can require a special assessment and how much you could be responsible for paying.
Check your current homeowners or condo policy limits
Review your policy to check your current loss assessment coverage and limits. Your condo or homeowners insurance policy may include a small amount of loss assessment coverage, but you’ll typically need to add an endorsement for higher amounts. Talk to your insurer for additional guidance.
Assess your risk factors
Consider common scenarios where higher loss assessment coverage limits may make sense, such as living in an older building or a property with shared high-end amenities. If risks are low, you may not need as much protection.
Compare coverage options and endorsements
Before you make a policy change, it’s a good idea to do some comparison shopping to see what coverage options and rates competing companies offer.
Add a loss assessment coverage endorsement or adjust your limits
If you’re keeping your current policy, ask your insurer to add coverage for your chosen amount. If you’re switching insurance companies, request the endorsement on your new policy.
Loss assessment coverage FAQs
Loss assessment coverage offers added financial protection for condo owners. See below for answers to frequently asked questions.
Is loss assessment coverage required?
No. Loss assessment coverage isn’t required, although it may be included in a standard condo or homeowners insurance policy or as an add-on.
Does HO-6 insurance include loss assessment coverage?
Yes. HO-6 insurance, or condo insurance, often includes a small amount of loss assessment coverage. You can also choose to increase the limit or add it as an endorsement if your policy doesn’t have it.
Does loss assessment coverage cover HOA fines?
No. Loss assessment coverage doesn’t cover HOA fines. It’s designed to pay your share of a special assessment after a covered loss in common areas, such as a fire in your building’s lobby.
How is loss assessment coverage different from liability coverage?
Loss assessment coverage helps pay your share of a special assessment for damage to common property covered by the master policy. In contrast, the liability portion of your HO-6 policy protects you financially if someone gets hurt in your condo or you cause property damage outside your unit.
Does loss assessment coverage apply per unit or per owner?
Loss assessment coverage applies to each unit. If you own multiple units in the building, each unit’s policy would have a loss assessment.
Does loss assessment coverage have a deductible?
It depends. Some insurance companies may charge a deductible for loss assessment coverage. Check your policy documents or ask your insurance agent whether your loss assessment coverage has a deductible.
Sources
- Colorado Department of Regulatory Agencies Division of Insurance. "Toolkit for Homeowners and HOAs on Insurance - Information and FAQs."
- Insurance Information Institute. "Insuring a co-op or condo."
- Wisconsin Office of the Commissioner of Insurance. "Condominium Insurance."
Methodology
Insurify data scientists analyzed rates from more than 180 home insurance companies sourced directly from Insurify’s partner companies and Quadrant Information Services. Rates span all 50 states and Washington, D.C., and quote averages represent the mean price for a given coverage level and geographic area. To ensure data reliability, only insurers meeting minimum quote thresholds were included in the analysis.
Unless otherwise specified, quoted rates reflect the average cost for homeowners with no prior claims and good credit with a home construction year of 1980. The default coverage assumptions include:
Default Coverage Assumptions
- Dwelling coverage: $300,000
- Deductible: $1,000
- Personal property limit: $25,000
- Liability limit: $300,000
Additional data points beyond these default values are sourced from Insurify’s proprietary database. Rates are updated monthly.
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Sarah ArchambaultInsurance Writer, Editor
Experienced personal finance writer
Background working with banks and insurance companies
Featured in
Becky HelzerEditor
John LeachLicensed P&C Agent, Chief Copy Editor
Licensed property and casualty insurance agent
10+ years editing experience
NPN: 20461358
Featured in