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Special Assessment Insurance: What is it and why you need it.

If you plan on owning or currently own a condo, it’s standard to insure the living space within your unit.  The Home Owners Association (HOA) will have hazard insurance that covers the exterior of your unit and the common areas.  However, do they have enough insurance or the funds in reserve to cover the insurance deductible or any other costs should there be a natural disaster or needed repairs?  If not, they will send the bill along to all of the residents of the HOA community.  This is a Special Assessment.  That is, the HOA will assess the need for repairs and the associated costs that exceed their coverage or funds available and then require all owners in the association to pay the remainder. This could be to the tune of thousands of dollars per unit.  Most people aren’t prepared to write that size of a check, or if they are, it takes away from savings or plans to remodel, go on vacation, etc.  In any case it’s not a good thing. 

So how can you protect yourself?  Insurance companies provide a rider for special assessment insurance, also called loss assessment insurance.  This endorsement will cover special assessment fees that are sent to members of an HOA.  This way, if you are notified by your HOA of a fee that you will have to pay, you can make a claim with your insurance company to cover the fee rather than pay it out of pocket.  The standard protection is $10,000 but some insurers may allow a higher amount.  Best practice is to talk to your insurance agent or shop around to see who can give you the best coverage.  This way, you are protected should your HOA notify you of a special assessment. 

About the author: Sean Gilliam is a Realtor® with RE/MAX Alliance in Northern Colorado and is a Certified New Home Specialist™.  Sean can be reached at or by phone at 970-313-6706.  For additional articles see Sean’s blog or to search for properties see his web page.

Interested in buying a home or selling your current home?  I am committed to your success. Give me a call at 970-313-6706 to get started.

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