What happens when natural disaster hits and destroys the community clubhouse? Are you responsible?
Find out more about Loss Assessment coverage and if you have it.
What is Loss Assessment Coverage?
The topic is worthy of discussion because in many instances homeowners are unaware of situations where they could be held liable, even when the incident occurred off their property.
Wikipedia states, a Neighborhood Association is a group of residents or property owners who advocate for or organize activities within a neighborhood. An association may have elected leaders and voluntary dues.
A Homeowners’ Association is a group of property owners with the legal authority to enforce rules and regulations that focus on restrictions and building and safety issues. A Homeowners’ Association often owns and maintains common property such as recreational facilities, and common areas like greenspace, parks, and clubhouses.
Difference between Homeowners’ Association and Neighborhood Association:
A Homeowners’ Association is mandatory and charges dues, while a Neighborhood Association is voluntary.
Imagine one of the following types of situations:
- Skateboarding accident in the association’s parking lot results in serious injury.
- Person drowns in the pool at a child’s birthday party.
- An association Director damages a homeowner’s reputation.
- A fire causes significant damage to the Clubhouse.
- During the annual Thanksgiving neighborhood touch football game, a participant falls and hits their head on a rock causing significant injury.
Situations like these happen. Lawsuits happen. Your association will have an insurance policy, and often will have at least $1 Million in liability coverage. But, is this enough?
What if:
- The liability claim exceeds the amount on the policy?
- The association in an effort to save money on their policy increased their deductible to $10,000?
- What if the clubhouse repair exceeds the amount on the policy?
All these examples are real and possible. Countless sources estimate that over 60% of homes/buildings are underinsured, is yours?
When a Homeowners’ Association is hit with a claim and the claim exceeds the coverage amount, each unit owner will be assessed the difference. For example, the association has a $1 Million liability policy and is sued for $1.5 Million, and there’s 50 homeowners in the association. The $500,000 gap is split between the 50 members. Ultimately, each homeowner pays $10,000.
Loss Assessment is a coverage on your home insurance policy that helps protect you when there is inadequate coverage on the master policy. In addition, you may be assessed an amount to pay for the deductible, like the $10,000 out of pocket expense above. Most standard home insurance policies include $1,000 in Loss Assessment coverage (coverage for deductibles not included). Fortunately, you can add more coverage by endorsement for typically less than $50 per year. Loss Assessment coverage for deductibles is generally also available.
Are you a part of a Homeowner Association? If you are not sure if you have additional Loss Assessment coverage, call your agent. You are always welcome to contact Hausmann-Johnson Insurance's personal insurance department with questions.
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