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Loss Assessment Law Change Can Cause A Major Gap In Your Condo Insurance

How can the loss assessment law change affect your condo insurance?


Condominium Loss Assessment InsuranceEffective October 1, 2020, a Maryland law takes effect that will increase the amount of loss assessment that a condo association can charge to their condo unit owners.

Prior to the law change, the maximum amount a condo association could charge for a loss assessment was $5,000.  The new law increases that amount to $10,000.

So what does the increase mean to you, the condominium owner? 

Well, most condo insurance policies were written with the loss assessment coverage of $5,000.  This was done to cover the owner for the maximum amount that the condo association could charge them for a deductible portion of a loss that originates in their condo unit.

Now that the amount the association can charge has been increased to $10,000 as of October 1, 2020, it could create a $5,000 gap in you condo insurance policy.

What is a loss assessment?

You may be wondering what exactly is a loss assessment that would be covered on your condo policy.  You’ve probably heard the term, but unless you have had an assessment, you may not understand what it is and how it can affect you.

If a loss originates inside of your condo unit and causes damage to the condominium structure, the association can charge you, the condo owner, an assessment to cover their deductible portion of their insurance policy, up to a $10,000 maximum as of October 1, 2020,

Here is an excerpt from the actual law:

“If the cause of any damage to or destruction of any portion of the condominium originates from a unit, the owner of the unit where the cause of the damage or destruction originated is responsible for the council of unit owners’ property insurance deductible not to exceed $10,000.”  

Any remaining deductible amount that may be owed by the association, becomes a common expense to the association.

The BIG confusing area of Loss Assessment Coverage:  

Here’s an example that can be confusing to most people.

Example:  A hurricane blows through Ocean City, Maryland and blows the roof off of your condo building.  In this case, the master policy insurance deductible would be considered a common expense of the association.  Let’s assume in this case that the association did not have enough money to cover the deductible.  They could deliver an assessment to all of the condo unit owners to cover this expense.

Most people would naturally think that since the assessment was issued to cover the master policy deductible, then the loss assessment coverage on their condo insurance policy should cover it.

Well, that would not be correct with most condo insurance policies.  Remember, that in order for the insurance to kick in, the loss must originate from the condo unit that is insured by the unit owner.

In this case, it did not.  So therefore it is a common expense of the association.   A common expense assessment is not covered under the standard condo insurance policy’s assessment coverage.

Insurance can be a bit confusing, so if you have any questions, feel free to reach out to one of our team members here at Huff Insurance at 410-647-1111.

Huff Insurance is a Trusted Choice Independent Insurance Agency.  We are here to serve your needs.

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