Florida Law Requires Loss Assessment Coverage for Condominium Unit Owner Policies

Most condo HOAs have a master insurance policy that covers shared areas on the property in case of damage or liability. Like any policy, though, the master policy has limits and deductibles, and if damage to a common area exceeds the limit or falls below the deductible, the HOA’s policy might not cover everything. In that case, the HOA might levy a loss assessment (sometimes called a special assessment) on individual owners to cover costs.

What Is Loss Assessment Coverage?

Loss assessment coverage is an optional add-on you can purchase for your homeowners or condo insurance policy. It acts as a financial safety net in case of damage to common areas of your building complex. Loss assessment coverage on your own policy would cover the loss assessment applied by your HOA.

What Is An Example of Loss Assessment Coverage?

Let’s say you live in a condo with a beautiful beach view and a shared courtyard. One day a storm damages the courtyard, causing $575,000 worth of damage to the pavings and underlying drainage systems. Your HOA’s master policy has a $500,000 limit for damage to common areas; therefore, the HOA is responsible for $75,000 worth of repairs.

Typically, if common areas owned by condominium associations are damaged or destroyed, the associations may seek to have each of the individual unit owners pay for a portion of the damage. If the loss is one that the association is insured against, the association may still assess unit owners for any costs or liabilities other than what is recovered from the insurance claim.

So if there are, let’s say, 30 units in the complex, each owner could be held responsible for up to $2,500. In other words, a loss assessment allows the HOA to pass the cost of the courtyard repairs on to the individual condo owners in case of a covered event like a storm.

Are Loss Assessment and Special Assessment the Same Thing?

All loss assessments are special assessments, but not all special assessments are loss assessments. A special assessment is an umbrella term that signifies any fee levied by an HOA on individual property owners, while a loss assessment is a special assessment due to a covered loss. In our example above, the $2,500 is both a special assessment and a loss assessment because it is applied to repair a loss due to a covered event.

Is Loss Assessment Coverage Required for Condo Insurance?

For the most part, loss assessment coverage is not required for condo insurance. However, loss assessment coverage can protect you against paying out of pocket for a loss assessment done by your HOA for damage to common areas. Additionally, some states and associations have rules about minimums, as discussed below.

What Is Florida’s Law for Loss Assessment Coverage?

Florida Statute § 718.111(4) gives condominium associations the power to make and collect assessments to “lease, maintain, repair, and replace the common elements of association property,” while Florida Statute § 627.714 requires that residential condominium unit insurance policies issued or renewed after July 1, 2010, must include at least $2,000 in property loss assessment coverage. This coverage would pay up to the stated amount for any assessments made upon each insured unit owner.

The loss assessment coverage provision of § 627.714 sets forth a few requirements:

  • Policy must include at least $2,000 worth of coverage
  • The coverage amount is in excess of all other coverage
  • Deductible can be no more than $250
  • The deductible will not apply if another one was already applied to the unit owner for the same loss
  • Coverage applies to all assessments made related to a particular loss
  • The loss must be to property owned by the community as a whole
  • The loss must be of the type covered by the unit owner’s homeowner policy

As long as the loss assessment coverage meets these minimum statutory requirements, it may include other terms and conditions. For example, as discussed in Loss Assessment Coverage and the “Master Deductible” Clause, this coverage may not apply to assessments made by associations to cover their own deductible on the association’s policy.

When determining how much loss assessment coverage one should get, unit owners may want to consider what property the association is responsible for, how much insurance the association has, and how much previous assessments have been.

Does HO-6 Cover Loss Assessment?

HO-6 policies can cover loss assessment, but it depends on a few factors. Namely, while loss assessment coverage is typically an additional endorsement on an HO-6 policy, it is sometimes included. To understand which is the case for you, be sure to review your HO-6 policy for any limits or exclusions that might apply.

Further Resources on Insurance Coverage Law

Navigating the complexities of insurance claims can feel overwhelming. Whether you’re facing unpaid claims or simply filing for the first time, our eBooks equip you with the crucial information you need to advocate for yourself with confidence.

Why Merlin?

Are you fighting an insurance company that won’t pay up on claims? With nearly 40 years of practice and $2 billion in recovered claims, our team stands by your side to ensure you can face any insurance challenge with confidence. Contact us today for a consultation, or read more about how we’re your trusted advocate.