With all the benefits that come with owning a condo, it’s no wonder that more and more Albertans are seeking this amazing living arrangement!
However, there’s a lot to take into consideration when it comes to condo-living compared to renting an apartment or owning a home.
While sorting through the necessary information with the condo association, you may have come across the term “special assessment.”
Or perhaps you have heard of other condo dwellers faced with this unusual notice.
Either way, it’s not something any condo owner wants to face but, depending on the condo corporation’s insurance coverage limits, it may be an expense you are responsible for.
Before you start worrying about special assessments, we want to break down what special assessments are and what you can do to protect yourself from these unwanted expenses:
What Are Special Assessments?
When you live in a condo, the condo owner is required to have insurance on the building to cover losses to common areas such as hallways, lobbies, recreational rooms, and parking garages.
Should damage occur to these areas, the insurance policy will cover losses to a point. When the coverage falls short, and the condo corporation does not have the reserve funds to cover the difference, they may try to recover those funds through a “special assessment”.
A special assessment means that the unit owner, yourself, is responsible for your share of the assessed costs.
These costs are determined by the condo board and may come into play if the reserve fund does not cover major repairs, asset replacement, and lawsuits.
In the event of a special assessment, you will be notified by the condo board. If you do not pay the special assessment, they can place a lien against your unit and possibly force the sale of your unit.
Before you panic about receiving a special assessment notice, keep in mind that these rarely occur. However, it’s always best to be prepared and may be insured to cover the costs of the special assessment.
What Does Condo Insurance Cover?
Condo insurance offers standard coverage to protect your condo unit, your belongings, and yourself.
This standard coverage includes:
- Personal liability coverage to protect you against legal expenses and medical bills if someone is accidentally injured while visiting your condo.
- Guest medical coverage to cover related medical expenses if someone is injured in your home.
- Building property protection to cover repairs to the interior of your condo such as walls and built-in units – if the damage is caused by a peril covered in your policy.
- Personal property coverage to cover your belongings such as appliances, furniture, appliances, and clothing if they are stolen or damaged.
However, many insurance providers offer additional coverages that are not standard in a condo insurance policy such as flood insurance and coverage for additional personal property such as jewelry.
In the case of special assessments, you can request something called “loss assessment coverage”.
What is Loss Assessment Coverage?
Loss assessment coverage is additional coverage you can add to your policy to prevent having to pay out of pocket if you are issued a special assessment by the condo association.
This optional protection can be easily added to your current condo insurance policy and can help you in other scenarios as well!
How Does Loss Assessment Coverage Work?
Loss assessment coverage can protect you from paying for an unexpected assessment in a variety of situations:
Injuries in Common Areas
If someone is injured in one of the condo’s common areas, such as a stairway or clubhouse, the condo association may be found at fault.
In this case, its liability coverage will pay out for resulting medical bills or legal costs.
However, if those expenses exceed their coverage limit, you may be required to pay a special assessment to make up for the difference.
Exterior Weather Damage
While the condo association’s insurance will cover exterior damage due to weather, the unit owners may be responsible for footing the bill if their coverage isn’t adequate.
For example, if a windstorm causes $550,000 worth of damage but the association only receives $500,000 in coverage, that leaves $50,000 to be covered by the unit owners.
If there are 50 unit owners in the association, each would have to pay $1,000.
However, with loss assessment coverage, you would be covered for that amount!
Damage to Common Areas
If some sort of incident originates in your unit, such as a fire, and causes damage to a common area, loss assessment coverage will also help pay for the repairs.
And, as we mentioned before, it will cover any damages to common areas that are not covered by the condo association’s insurance policy.
How Much Loss Assessment Coverage Do I Need?
Before you decide how much loss assessment coverage you want to add to your policy, it’s important to examine the condo corporation’s master insurance policy.
This way, you can find out their coverage limits and if any special deductibles apply for certain hazards.
From there, you can speak to a professional insurance broker to determine how much coverage is right for you.
How Do I Get Loss Assessment Coverage?
Getting condo special coverage to protect you from special assessments is as easy as speaking with an expert insurance broker!
Here at Capital Insurance, we hope that you never need to use loss assessment coverage but we are dedicated to ensuring peace of mind when it comes to owning a condo and protecting your finances.
Special assessments rarely happen but they are not unheard of. In order to protect yourself from paying repair costs out of pocket, speak to one of our agents today about adding loss assessment coverage to your condo insurance policy.
It’s a small investment that can yield significant savings should your condo association require the use of a special assessment.