Most condo insurance policy include some loss assessment coverage, however I recommend you consider increasing the loss-assessment coverage to your condo / townhome / HO6 insurance policy if you own a condominium or are thinking about buying one. Here’s why:
Imagine that one of Colorado’s infamous hailstorms heavily damages the roof and other common areas covered by the homeowner association’s insurance policy.
Because of the high risk of hail damage in Colorado and the high cost of the losses involved, many insurance companies have recently changed the deductibles on their policies to percent deductibles (many times these are 5% or even more) of the insured property.
With a 5 percent deductible, the association’s deductible would be 5% of the damaged building’s reconstruction cost value. So, if the HOA has $20,000,000 worth of coverage on their buildings and all buildings are damaged by a hail storm, the deductible would be $1,000,000 – a hefty amount for all but the wealthiest associations. Divide those amounts by the number of units in your condominium complex and that’s potentially your share. The amount of loss assessment coverage typically included in a condo policy can be as low as $1,000. We’ve seen loss assessments as high as $20,000 in recent years!
And, of course, there are high-cost maintenance items not covered by insurance that have to be paid for in full by the homeowners’ association, leaky swimming pools, a furnace system that is reaching the end of its life, an aging and crumbling parking structure and the like. Most associations have reserves set aside to pay for major repairs or maintenance items. But what about costs that exceed available reserves? Maintenance assessments, sometimes referred to as “Special Assessments” would not be paid by your loss assessment coverage. Unfortunately, HOA members don’t have any relief to pay for maintenance assessments, other than their own pocketbooks.
If you own a condominium, your exposure can vary widely, depending on the condition of the common property and the reserves that have been set aside to cover unanticipated major expenses.
Questions about where you stand and the amount of loss-assessment coverage you should consider? Give us a call at (303) 452-6662, and I can help you figure it out.
