Owning a condo comes with several different benefits. From shared amenities like swimming pools, gyms, and other shared spaces, being a condo owner makes you a part of a community within your condo building.
That said, condo owners also face unique risks associated with owning a piece of property in a building with other people. This is where loss assessment coverage comes into play. But what exactly is this type of insurance policy, and how does loss assessment coverage work? If you're thinking about becoming a unit owner, stick around to learn more about this essential insurance coverage.
Loss assessment coverage defined
Loss assessment coverage helps pay for your share of costs that your condo association may ask all condo owners to pay for if property damage is caused to any of the common areas throughout the building or if liability claims exceed the condo corporation's insurance policy limits.
In other words, loss assessment coverage helps protect you from any pitfalls between the master policy and your own policy, which is why condo owners should purchase condo insurance on top of what is included in their monthly condo fees and add this optional endorsement to their insurance portfolio.
Is a loss assessment the same as a deductible?
No, a loss assessment is not the same as a deductible. Let's take a closer look at each on of them:
Loss assessment
Loss assessment is a charge imposed by your condominium or homeowners association. The charge is given to all unit owners to cover any expenses that may exceed the policy limits or to cover expenses not included in the master policy.
Deductible
In contrast, a deductible is the amount you pay in the event a claim is filed with your provider before your coverage kicks in.
What's the main difference between loss assessment and a deductible?
How exactly do these differ from one another?
Loss assessment
A loss assessment is meant to spread any unexpected costs among unit owners in a complex that may arise, typically for common area repairs or liability claims that the condominium coverage is unable to pay for due to their coverage limits being exceeded.
Deductible
A deductible, on the other hand, is a shared expense between a policyholder and the insurance company when a claim is filed.
What does loss assessment cover?
Loss assessment insurance offers comprehensive protection to condo unit owners when their condo corporations impose shared costs onto them. Here is a closer look at what type of insurance claim this type of additional coverage helps pay for:
Damage to common areas in the condo building
If a covered claim, including a severe storm, fire, or vandalism, causes damage to common property, whether it be a swimming pool, gym, lobby, or outdoor area, and the repair costs exceed the condominium corporation master policy coverage limits, this loss assessment coverage helps pay for your portion of the repairs.
For example, let's say a fire causes damage to the gym area in your building, causing $200,000 worth of damage. The condo corporation has an insurance policy that only covers a maximum amount of $150,000. That means the damages exceed their limit, and an assessment is required.
When this occurs, your condo corporation can split the remaining amount as a loss assessment, meaning you'll need to pay out of pocket for your portion of the loss. But, with a condo insurance policy, loss assessments are covered by your insurance company instead.
Liability coverage
If someone is injured in a common area of your building and decides to sue your condo board for damages, there's a chance that the liability claim could exceed the master policy's liability coverage.
Again, your condo corporation could move forth with a loss assessment, requiring individual unit owners to pay the remaining liability settlement, meaning more money out of pocket. This is where your insurance policies come into play, protecting you from having to pay for loss assessments.
High deductibles
If your condo association’s master policy has a high deductible and an insurance claim is filed against them, they could put forth an assessment to cover the expensive deductible. However, your loss assessment coverage can help pay your portion of this deductible payment rather than having to pay for it yourself.
Special assessment
Let's say that your condo association needs to make significant repairs or property improvements that are unfortunately not covered by the master policy or your condo reserve funds. In this case, they can file special assessments to cover the costs.
Again, this means that you will need to pay for the additional costs associated with these repairs or upgrades. Luckily, your loss assessment coverage can help pay your share.
What is not covered in loss assessment coverage?
Now that you know what is covered by loss assessment insurance, it's important to mention that some claims will not be included in this type of coverage. Here's a closer look:
Non-covered peril
Loss assessment coverage will not apply to any condo assessments that are not considered a covered loss in your condo insurance. For example, if your condo experiences flood damage or damage resulting from an earthquake. Keep in mind, however, that you can buy additional coverage at an extra cost.
If loss assessments are filed by your condo corporation because the building needs to undergo routine maintenance in a common property area, this type of condo policy will generally not be covered. If the loss assessment is related to the everyday operation of the building management itself, your loss assessment coverage will also not apply here.
If you're unsure about your insurance as a condo owner, we recommend reaching out to your insurance company and asking for clarification on insured and uninsured events that apply. This can help you purchase additional protection if needed so you can ensure that you are comprehensively covered if any loss assessments are filed by your corporation.
Why should you have your own personal condo insurance policy
Yes, if you own a condo, having insurance is essential. Condo insurance is similar to a homeowners insurance plan. However, it takes into account the unique risks of living in a development with other residents.
If you're unsure whether condo insurance is something to consider, here's why we think you should:
Bridges the gap between your condo association's coverage
As you know, your condo association has its own insurance plan that is partially paid for with your monthly strata fees. However, many owners don't know that this coverage will only cover damage caused to shared spaces throughout the complex, not your individual unit.
For example, if any damage is caused to the lobby, hallways, elevators, or any of the shared amenities, it will cover the cost of any repairs or replacements. It also covers liability claims that happen in these common areas.
Now, let's say something happens to your personal unit, whether it be physical damage to your personal belongings, someone injuring themselves, or something stolen from your condo. Without any coverage, you'll be responsible for paying the cost of repairs, replacements, lawyer fees, medical costs, and any other associated expenses that occur from a filed claim.
Additional living expenses
If your unit is damaged and becomes unlivable, you'll likely need to stay somewhere else while repairs are being done, which can cost you a ton of money. But with personal condo coverage, any extra costs that are incurred as a result of a claim, including the additional cost of living somewhere else, will be covered by your policy.
Special assessment
And, of course, your policy can include loss assessment coverage, which helps pay for your share of expenses for damage or liability that is not paid for by your condo association.
Ultimately, paying a small amount for coverage throughout the year really is priceless when you think about how much money you can save in the event something happens to your complex or individual unit, which is why all owners should purchase coverage.
How much loss assessment coverage do I need?
Now, as a condo owner, you're probably thinking, how much coverage do you really need? In truth, how much loss assessment coverage you require really depends on your financial situation and the condo development you live in.
Here is a closer look at what you can do to determine what and how much coverage you should purchase:
- Look at the master policy of your building: Before moving into your condo, ask your condo association for a copy of their master insurance policy. With this, you can review their coverage limits and deductible amounts to get a better sense of how much coverage you have as an owner of your unit.
- Consider past assessments: Reach out to your condo association and ask them for a list of past assessments and whether any special assessment scenarios have ever been filed. This can help you get a better sense of the condition of your new condo, as well as how the association operates.
- Evaluate any potential risks: Think about the type of amenities and common areas in your condo complex. Are there any areas that look run down or on the verge of breaking? This can help you decide how much coverage you purchase.
- Speak with your insurance company: When in doubt, talk to your insurance company about your current needs and whether you have any concerns. They can help evaluate your situation and give you professional advice about how to move forward with your insurance coverage.
- Shop around for insurance: Always remember to look at different insurance policies and their loss assessment coverage options to find the best fit for your needs. The key here is to find affordable coverage without compromising the level of protection you're getting.
If you're interested in purchasing a condo policy, the experienced brokers from BrokerLink are here to help. We've got access to some of Canada's top insurance policies and are able to customize an insurance plan tailored to your unique circumstances and insurance risks.
We can also help you apply for insurance discounts if you qualify for any, so you can save big on the cost of purchasing a new plan!
How much does loss assessment coverage cost?
Loss assessment coverage is a portion of your overall condo insurance policy. Therefore, in order to have this sort of protection, you will need to purchase your own personal condo insurance policy. While the amount unit owners will need to pay for their insurance policy will vary based on numerous variables, on average, you can anticipate paying between $400 and $600 per year.
Again, keep in mind that this is just an estimate, and the exact amount you pay for coverage will depend on numerous factors. So, if you're in the market for condo coverage, we suggest shopping around to find the most affordable option out there that doesn't compromise the level of protection you have.
You should also confirm whether you qualify for any discounts with your provider, as this can help you save on your monthly premium.
Get customized condo insurance policies with BrokerLink today!
Condo unit owners looking to purchase condo insurance can count on the experienced brokers from BrokerLink for seamless, customized service.
BrokerLink has a plethora of brokerages across Canada! If we're in your neighbourhood, come on into any one of our locations to work with a broker in person. You can also reach us over the phone during regular business hours. Alternatively, get a quote online from the comfort of your own home with our easy-to-use quote tool!
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