Coverage Explainer: Condo Insurance for Loss Assessment

The first of those first NYC condos was an eight-unit building on West 57th Street in Manhattan, which seems like a completely reasonable way to live, no? You’d know your neighbours and co-owners well enough to know they’ll respect the common areas, you’d have a say in the decisions made, including to whom a unit could be sold.

If all condos were like that, you wouldn’t need loss assessment coverage.

But they’re not, so you do.

What is loss assessment coverage for condos?

Loss assessment coverage insulates individual condo owners against the cost of repairing damage to common areas. In cases of minor damage, the condo corp’s master insurance policy usually covers the cost. But in cases of major damage, part of the cost of repairs will be passed on to the owners who would have to come up with the money right away. That’s where loss assessment coverage would kick in.

When we use the word “damage,” we’re referring to both the damage of property or the suing of the condo for damages by someone else. So your loss assessment insurance might activate to cover your share of the cost of repairs after a party room kitchen fire, or it might activate to cover the damages awarded to someone who sued the condo board for slipping on the ice in front of the building.

How does loss assessment coverage for condos work?

When money is required to pay for damages beyond what the master policy will cover, the condo corporation will simply divide the cost among the owners, either evenly or according to square footage, depending on what the condominium bylaws state. This is what’s known as a loss assessment.

When a loss assessment is levied, and depending on the nature of the damage or loss, you might need to come up with that money rather quickly.

Without loss assessment insurance, that would be coming out of pocket. If you couldn’t make the payment, depending on the bylaws, you could be subject to anything from fines to a forced sale.

With loss assessment insurance, you: make a call, make a claim, get the money and get on with your life.

Loss assessment versus special assessment

These two aspects of condo living are mixed up often — and only one is covered by loss assessment insurance.

A special assessment is when repairs to the building’s common areas are required due to age or general disrepair: like redoing the foyer, fixing the roof or changing out the plumbing. This differs from loss assessment, which is concerned with damages resulting from a specific incident.

Should every condo owner have loss assessment insurance?

If you live in a large condo building with many owners, renters and high turnover, you should consider loss assessment coverage mandatory. With so many people and virtually zero control over what happens, the chances of a loss assessment being required at least once over the long term is too great to risk.

If you live in a smaller building with few owners, you should still consider loss assessment coverage mandatory because the cost of repairing damages will be split among fewer people — and the costs of everything are only going up.

Missing loss assessment insurance? Make your policy whole with condo insurance from Onlia.