Loss Assessment Coverage

When it applies

Loss assessment generally responds when the assessment results from a peril the HO-6 would cover, such as fire or a liability claim against the association. It usually does not pay for assessments for routine maintenance or upgrades.

Deductible assessments

Some policies limit how much loss assessment coverage applies toward the association's deductible. If your building carries a large deductible, ask how each quote handles it.

How a special assessment happens

Associations pay for losses through their master policy, but the policy has limits and a deductible. If a covered loss exceeds the limit, or if the association decides to pass its deductible to owners, the board can levy a special assessment on every unit, usually based on each unit's ownership share. A liability judgment against the association that exceeds its liability coverage can lead to the same result.

Choosing a limit

Many HO-6 policies include a small loss assessment limit, and insurers offer higher limits for an extra premium. To pick a level, find the master policy deductible, ask how the bylaws allocate it, and estimate what your share of a large loss could be. If the building has a percentage deductible for wind or earthquake, ask whether the loss assessment coverage applies to it, since some policies restrict that.

What it usually does not pay

• Assessments for deferred maintenance or reserve shortfalls
• Upgrades and improvements voted by the board
• Losses from perils your policy excludes, such as flood or earthquake unless endorsed
• Fines or penalties imposed on the association

Frequently asked questions