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Being a “member” can have a major downside. If you are a member of a homeowner association or a condominium association, you could find yourself on the hook for expenses for which you were totally unprepared. I’m talking about Loss Assessment. Your home/condo association might own and maintain shared spaces used by all members: a pool, a lake, a road, a recreation center. Losses connected with these shared spaces might be charged back to you. Make sure that your PERSONAL insurance policy is designed to protect you from such losses.

January 12, 2011 Leave a comment

Loss Assessment refers to the situation where a home or condo owner is billed for certain unexpected expenses incurred by their association. All condo owners are members of their condo association. Home owners are often members of a Home Owners Association. These associations are typically the entities that own and maintain shared spaces that are used by all members: a pool, a lake, a road, a recreation center. Let’s suppose that a playground owned by the association was severely damaged. One would hope that the Association would have an insurance policy in place to cover this loss. What if it doesn’t? What if the loss exceeds the limit of the policy? What if the loss is not covered by the policy? What if the association is sued for injuries on the playground equipment?

The bottom line is this. Such associations can easily incur costs not covered by the Association’s insurance policy. When this happens, the Association will typically assess its members to cover the cost. Maybe the Association carries a $500,000 liability policy, and is sued for $750,000. That’s $250,000 not covered by insurance. If there are 50 condos/homes in the association, each could be billed for $5,000 to pay their portion of the expense. 

If you, the home/condo owner is assessed for losses, then where are you going to find that money to pay the assessment? You savings account? Your child’s college fund? A better place to look is in your personal homeowner or condominium owner insurance policy.

Most homeowner and condominium owner insurance policies have a small built-in amount to cover loss assessment, and it would normally appear as a line item on your insurance policy declaration page. The built-in amount varies from company to company, often between $1,000 and $2,500.

How much do you think you should have? That’s not a question we can answer but you should consider what kinds of community resources are maintained by your association, how dangerous those resources might be, and you might even want to ask what is covered by your association’s insurance policy.

But consider this. I just peeked at the cost of $50,000 of Loss Assessment coverage on one of our homeowner policies. The cost of $50,000 of protection was $13. That’s a tremendous protection for very little money. 

Read a little more about some other examples of the value of this neat little coverage in the article below!

The Value of Loss Assessment Coverage

By Joel W. Meskin, Esq

http://njcooperator.com/articles/271/1/The-Value-of-Loss-Assessment-Coverage/Page1.html

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Categories: Know Your Policy