LOSS ASSESSMENT COVERAGE
FUNCTION:
The Loss Assessment Coverage endorsement is subject to a $250 deductible and will cover assessments charged to the insured for losses to commonly-held property when caused by a named policy peril.
Loss Assessment coverage is recommended when homeowners belong to an association of property owners. The association may own commonly-used property such as a clubhouse or pool, generally insured by the association. However, their insurance may not cover certain perils, the amount of insurance may be inadequate, or through some error, the property may be uninsured.
When commonly-held property is damaged or destroyed, restoration is usually financed by levying an assessment against the association members (Section I protection). Loss Assessment coverage helps eliminate or off-set the customer’s out-of-pocket expense.
EXAMPLE:
Fred and Emma live in a small community of 15 homeowners and are members of their property owners association. A commonly-owned clubhouse is situated on a 16th lot.
A fire causes $320,000 damage to the clubhouse, but the association insured the structure for only $260,000. The outstanding $60,000 loss is assessed to the property members at $4,000 each.
If Fred and Emma purchased the Loss Assessment Coverage endorsement, the assessment for fire will be covered up to the limit displayed on the endorsement. Fred and Emma will only pay the $250 deductible.
