Many neighborhoods that include condos and single-family homes require property owners to be a part of a homeowner’s association. These groups carry home HOA insurance, which covers them against liability and other losses that occur within the community, protecting association members both legally and financially. Many association members may not realize that there are limitations to HOA policies that could still leave them liable for damages unless their personal home insurance includes HOA loss assessment coverage.
What Is HOA Loss Assessment Coverage?
HOA loss assessment insurance is coverage that protects individual residential property owners who are a part of a homeowners association in the event the HOA must pay damages for a claim. Should an HOA end up with a judgment against it, their policy would pay that claim up to the purchased policy limits. If the claim is higher than the liability coverage that is carried, any remaining amount must be disbursed among association members. HOA loss assessment insurance covers members by paying this benefit.
Do Condo Owners Really Need HOA Loss Assessment Insurance?
The answer to this question depends on how much liability coverage the HOA itself carries and how much personal risk homeowners are willing to take. For example, if an association has liability coverage up to $1,000,000, this leaves condominium owners liable to pay for any damages beyond what the HOA insurance will cover. That amount could be tens of thousands of dollars depending on the claim against the HOA, the amount that is paid out, and how many association members must pay that difference.
While the likelihood of something like this happening is slim, condo owners without loss assessment coverage may find themselves in a precarious situation should they end up being responsible for part of the liability claim. HOA loss assessment coverage makes good sense to add to standard home insurance to avoid costly problems.
Obtaining HOA Loss Assessment Insurance
Loss assessment coverage is purchased by property owners in addition to regular home insurance but is contingent on an HOA insurance policy already existing. Homeowners should determine the amount of coverage, how liability is assigned, and the amount of risk each property owner assumes on the existing HOA policy. With the help of their home insurance company, property owners should determine whether HOA loss assessment coverage is recommended and how much should be purchased.
It is also a good idea for owners to discuss this with neighbors to find out if they have loss assessment coverage and how much. Although the entire community is protected by this coverage in the event of a judgment against the association, some may not even be aware that they need it.
Many owners of condos and private residences who are a part of an HOA believe they are fully protected by their current home insurance policies. Unless they also have loss assessment coverage added to their standard homeowners insurance, this is probably not true. To ensure full liability protection and reduce personal risk, property owners should consider adding this HOA insurance coverage to their personal insurance. Loss assessment coverage is inexpensive supplemental protection that owners of association properties need in addition to whatever policy their association may carry!
