Loss Assessment Coverage and Earthquakes

Individual homeowners policies, whether HO-3 (single family unit), HO-4 (landlord policy) or HO-6 (residing unit owner in a condominium or townhouse) can provide loss assessment coverage. Loss assessment coverage will pay for an amount of special assessment a unit owner is charged typically due to insufficient or nonexistent insurance coverage for a property loss the association incurs.

Be aware, there are different types of loss assessment. If you are assessed for damage resulting from an earthquake or land movement, you will need a very specific earthquake loss assessment policy. A standard loss assessment policy excludes assessment due to earthquake. Speaking of earthquake; Does your association have an Earthquake Policy? Something a lot of clients don’t realize is that it has been nearly three decades since the Loma Prieta earthquake and feels twice as long since Earthquake Insurance premiums have been this affordable. If your association does not currently have earthquake coverage, now might be the time to explore the option.

Avoid potential loss assessments by examining association insurance coverage. Is your total insurable value limit accurate and enough to rebuild your community should a total loss occur? Is your Reserve Study current and are you funded appropriately for maintenance? Are your monthly assessments sufficient? Answering “yes” can help avoid loss assessment situations.

I strongly encourage unit owners to purchase their own loss assessment policies should the unexpected occur. Unit owners should be sure to explore the loss assessment limit and consult personal lines agents to determine they have a limit of coverage they are comfortable with.