Condo Insurance & Special Assessments: Are You Covered?

24 Jul Condo Insurance & Special Assessments: Are You Covered?

The condo lifestyle offers a sense of community and convenience. Shared amenities, on-site maintenance, and a cohesive living environment are all attractive benefits. However, condo ownership comes with unique financial considerations, including special assessments. Let’s explore the concept of special assessments and how condo insurance interacts with this potential financial burden.

Understanding Special Assessments in Condominiums

A condo association is responsible for maintaining the building’s common areas and amenities. This includes hallways, elevators, landscaping, the roof, pool, and other shared spaces. The association funds these activities through regular condo fees paid by each unit owner.

However, unforeseen circumstances can arise that require significant repairs or upgrades beyond the scope of the regular budget. This is where special assessments come in. A special assessment is a one-time charge levied on all condo owners to cover unexpected expenses not covered by the association’s reserves. These can be due to:

• Major repairs: A damaged roof, failing boiler system, or structural issues may necessitate significant repairs that exceed budgeted funds.
• Capital improvements: Upgrading aging amenities, adding security features, or making the building more energy-efficient may require a special assessment.

The Financial Impact of Special Assessments

Special assessments can range from a few hundred dollars to tens of thousands, depending on the nature of the expense and the size of the building. This unexpected financial burden can strain condo owners’ budgets and cause significant stress.

Can Condo Insurance Help Mitigate Special Assessments?

Standard condo insurance policies typically cover damage to your individual unit and personal belongings. They also provide liability coverage if someone gets injured in your unit. However, condo insurance on its own does not cover special assessments.

The good news is that some condo insurance policies offer an optional add-on coverage called loss assessment coverage. This coverage kicks in when the condo association levies a special assessment due to a covered peril to the common areas, such as fire, windstorm, or hail damage.

Key Points About Loss Assessment Coverage

They are –

• Not automatically included: You need to specifically request and pay extra for loss assessment coverage to be added to your condo insurance policy.
• Coverage limits: Loss assessment coverage typically limits how much it will pay towards a special assessment. Be sure to understand the coverage limit and how it relates to the potential cost of special assessments in your building.
• Covered perils: This coverage typically applies only to specific events outlined in your policy, such as fire or natural disasters. Damage caused by normal wear and tear or neglect would not be covered.

Taking Control: Protecting Yourself from Special Assessments

While loss assessment coverage can offer some financial protection, it’s not a guaranteed solution. Here are some additional steps you can take to be prepared for potential special assessments:

• Review your condo association’s financial statements: This will give you an idea of the association’s financial health and the likelihood of future special assessments.
• Ask questions at condo association meetings: Understanding upcoming maintenance projects and the association’s reserve funds can help you anticipate potential assessments.
• Factor potential assessments into your budget: Consider setting aside some money each month as a buffer to handle unexpected expenses.

Kevin S. Dougherty Insurance Agency: Your Partner in Condo Protection

At Kevin S. Dougherty Insurance Agency, we understand the unique needs of condo owners. Our experienced agents can help you navigate the complexities of condo insurance and ensure you have the right coverage in place, including loss assessment coverage if it’s a good fit for your situation. Contact us at Marci and Kevin today to safeguard you from the financial burden of unexpected special assessments. Call us at (630) 575-0800 to get started.