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Does My Massachusetts Condo Insurance Cover Loss Assessments?

Condominium associations, and not individual unit owners, are typically responsible for any accidents that occur in a condo complex’s common areas. Should an accident leave the complex’s condominium association with a major financial liability, however, the association may pass the expense onto unit owners through loss assessments. If you have a condo in Massachusetts, condo insurance with loss assessment coverage may help mitigate this potential risk.

Condo Insurance in Massachusetts

Are Loss Assessments Covered by My Massachusetts Condo Insurance?

What Are Loss Assessments?

Condominium associations in Massachusetts pay their expenses with funds that come from unit owners. These funds are obtained through assessments. An assessment is simply a fee that’s charged -- or assessed -- to everyone who owns a unit within the condominium complex.

Most condo owners are familiar with at least one type of assessment: annual assessments. Annual assessments are dues that go toward the association’s operating expenses. They might be used to pay for utilities, landscaping, building maintenance, amenities and other approved costs. (Annual assessments are sometimes divided into monthly charges.)

Special assessments are another type of assessment that condominium owners may have encountered. These assessments are normally charged in addition to annual assessments, and they’re often used to fund major projects or upgrades. For example, an association might levy a special assessment to redo a parking lot or add a new feature people want.

Loss assessments are usually reserved for when a condominium association faces a major financial loss that it doesn’t have enough funds to cover. For example, an association might use a loss assessment to rebuild after a fire or to cover legal costs associated with a major liability lawsuit that the association faces. In most cases, loss assessments are equal to the costs that remain after any applicable insurance policies and available reserve funds have been exhausted.

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How Does Loss Assessment Coverage Protect Unit Owners?

Loss assessment coverage is a specialized protection that typically helps cover loss assessments that a unit owner might be charged. As is true with any insurance coverage, there are stipulations that determine what loss assessments are covered and how much coverage is afforded. An insurance agent who specializes in condominium insurance can review a policy’s loss assessment coverage and see exactly what protections the coverage offers.

Generally speaking, loss assessment coverage covers loss assessments only. It often doesn’t cover annual assessments, which unit owners should budget for, or special assessments, which are normally used to improve a complex.

Condo Insurance in Massachusetts

How Much Loss Assessment Coverage Should My Condo Insurance Policy Have?

Because everyone’s situation and risk tolerance is different, there’s no set amount of loss assessment coverage that’s right for every unit owner. Owners frequently add a sizeable amount of coverage to their condo insurance policies, for just one incident can result in an assessment totaling thousands of dollars.

For example, a building fire that results in $30,000 worth of uncovered damage might result in an assessment of $3,000 per owner if the complex had 10 units. Much worse, a million-dollar liability lawsuit could lead to an assessment of $50,000 in the same complex if the condo association only had $500,000 worth of liability coverage.

When compared to these potential expenses, the cost of adding loss assessment coverage to a condominium insurance policy is highly affordable.

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Work with an Experienced Massachusetts Insurance Agent

For help determining how much loss assessment coverage your condo insurance policy should include, contact the team at Paul T. Murphy Insurance. Our independent insurance agents are familiar with the nuances of condominium insurance policies and the risks Massachusetts condo owners face. They’d be happy to review your situation with you and help you select the right loss assessment coverage.