Does Condo Insurance Cover Assessments?
Does your condo insurance cover assessments? Explore the specific conditions under which your policy helps with unexpected HOA costs.
Owning a condominium unit involves shared expenses and potential liabilities. Condo owners contribute to the upkeep of common areas, which can lead to additional charges. A common question for unit owners is whether personal condo insurance covers these assessments. This article explains how individual and association-wide insurance policies interact regarding these financial contributions.
Understanding Condo Assessments
Condominium assessments are financial contributions from unit owners for managing, maintaining, and improving shared property. These charges fall into two categories: regular and special assessments. Regular assessments, often called monthly or quarterly dues, fund routine operational expenses like landscaping, common area cleaning, shared utility payments, and contributions to reserve funds for future major repairs.
Special assessments are one-time fees for unexpected or extraordinary expenses not covered by the regular budget or existing reserves. Reasons for special assessments include unforeseen repairs (e.g., storm damage, structural issues), major capital improvements (e.g., roof replacements, facade repairs), or legal costs. These assessments are distributed among unit owners based on their proportionate share, often influenced by unit size.
Condo Insurance Policies Explained
Two main insurance policies exist in a condominium community: the individual unit owner’s HO-6 policy and the condo association’s master policy. An HO-6 policy covers the interior of a condo unit, including walls, floors, fixtures, and personal property, plus personal liability protection. This “walls-in” coverage focuses on the individual unit’s interior.
The condo association’s master policy covers common areas, the building’s overall structure, and shared amenities like lobbies, elevators, fitness centers, and exterior components. This master policy includes property insurance for the building’s physical structure and liability insurance for incidents in common areas. Master policies vary in scope, from “bare walls-in” (basic structure only) to “all-in” (including original unit fixtures), but do not cover personal belongings or individual unit finishes.
When Condo Insurance Covers Assessments
A unit owner’s personal HO-6 insurance policy can cover certain types of special assessments through a specific provision called “loss assessment coverage.” This coverage helps pay for a unit owner’s portion of a special assessment levied by the condo association. It typically applies when the assessment results from damage to common areas caused by a covered peril, such as fire, wind, or hail.
Loss assessment coverage often activates when the master policy’s deductible is passed to unit owners, or when repair costs or liability claims exceed the master policy’s limits. For example, if a fire damages the building’s lobby and repair costs exceed the association’s master policy limit, loss assessment coverage can help cover the unit owner’s share. This coverage usually has its own specific limits, which can range from a standard amount, such as $1,000, up to higher optional limits like $25,000 or more, and may also have a deductible.
When Condo Insurance Does Not Cover Assessments
While loss assessment coverage is beneficial, a unit owner’s HO-6 policy does not cover all condo assessments. Regular monthly homeowners association (HOA) dues or standard operating assessments, which fund routine maintenance and administrative costs, are not covered. These are ongoing financial responsibilities of condo ownership.
Special assessments for routine maintenance, capital improvements, or upgrades not resulting from sudden, accidental damage from a covered peril are excluded. For instance, assessments for a planned roof replacement due to age, lobby renovations, or parking lot resurfacing are not covered. Assessments for damage outside the master policy’s terms, or for perils not covered by the individual HO-6 policy (e.g., flood damage without separate flood insurance), also do not trigger loss assessment coverage.