The first of those first NYC condos was an eight-unit building on West 57th Street in Manhattan, which seems like a completely reasonable way to live, no? You’d know your neighbours and co-owners well enough to know they’ll respect the common areas, you’d have a say in the decisions made, including to whom a unit could be sold.
If all condos were like that, you wouldn’t need loss assessment coverage.
But they’re not, so you do.
What is loss assessment coverage for condos?
Loss assessment coverage insulates individual condo owners against the cost of repairing damage to common areas. In cases of minor damage, the condo corp’s master insurance policy usually covers the cost. But in cases of major damage, part of the cost of repairs will be passed on to the owners who would have to come up with the money right away. That’s where loss assessment coverage would kick in.
When we use the word “damage,” we’re referring to both the damage of property or the suing of the condo for damages by someone else. So your loss assessment insurance might activate to cover your share of the cost of repairs after a party room kitchen fire, or it might activate to cover the damages awarded to someone who sued the condo board for slipping on the ice in front of the building.
How does loss assessment coverage for condos work?
When money is required to pay for damages beyond what the master policy will cover, the condo corporation will simply divide the cost among the owners, either evenly or according to square footage, depending on what the condominium bylaws state. This is what’s known as a loss assessment.
When a loss assessment is levied, and depending on the nature of the damage or loss, you might need to come up with that money rather quickly.
Without loss assessment insurance, that would be coming out of pocket. If you couldn’t make the payment, depending on the bylaws, you could be subject to anything from fines to a forced sale.
With loss assessment insurance, you: make a call, make a claim, get the money and get on with your life.