I am talking with a prospective client who’s buying a condo later this month. She was unware of an option on the condo insurance quotes I prepared for her which is important because her new home has a mandatory Home Owner’s Association for the complex. In fact, regardless of whether you own or are buying a home, town house, or condo with a mandatory HOA, this one option should be included with your home insurance. It’s loss assessment coverage and it can save you thousands of dollars.
Homeowner associations collect dues for many reasons such as upkeep of a building, community pool, clubhouse, or common areas and lawncare. In addition, these dues are also used to pay the premium for the HOA’s commercial insurance policy. In the case of a condo or town house community, the association policy covers the building’s structure including the roof, framework, exterior, and common areas. In the case of a single-family home community, the policy covers community fences, gates, entryways, and even a community clubhouse or pool if those are present.
HOA policies include general liability coverage in addition to any community property coverage. As with any home insurance policy, HOA policies have a policy deductible for any covered loss such as damage caused by wind, hail, fire, smoke, water leak, etc. If there are not enough reserve funds in the HOA account to cover the policy deductible from a covered loss, the association will be required to assess homeowners for any shortfall related to that loss. Assessments like this can cost homeowners several thousand dollars.
Loss assessment coverage is designed to cover the homeowner when they are assessed for a covered loss from the association. Most policies will only pay for an assessment that is caused by a covered loss such as damage from wind, hail, fire, etc. Assessments from the association for cosmetic updates or general repairs not caused by a covered loss, etc. are usually not covered.
The amount of loss assessment coverage varies by home insurance company, but I usually recommend at least $10,000 and up to $25,000 in coverage. The cost to add this coverage to most condo, town house, or home policies averages $1 per $1,000 of coverage per year. That’s a lot less than being assessed to help pay for a new roof due to the next hail storm.
The prospective client who’s buying the condo was very grateful I’d included this option. To date, everyone I’ve mentioned it to whose home is in a community with a mandatory homeowner’s association, has seen the value of it and included it with their home insurance policy. They realize they could pay for this coverage for many, many years and it would easily pay for itself with one assessment claim. What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!