Loss Assessment coverage is insurance that a homeowner purchases from an insurance company to pay the homeowners share of an assessment charged against all members due to a covered loss.  It can be confusing, so let’s look at an example.

Loss assessment coverage is usually prompted by an event or item that would have been covered under the association policy, but there were insufficient limits.  For example, your HOA was just hit with a $1,500,000 judgment due to a rollerblading accident on the premises. Because the association’s general liability coverage per incident is $1,000,000, the remaining $500,000 is levied on the membership as a special assessment.

For owners who have loss assessment coverage, insurance will pay their share of the assessment.  Owners who do not have coverage are responsible for paying the special assessment themselves. Unfortunately, many homeowners find out too late that “full coverage” policies don’t usually include loss assessment.  It’s an inexpensive addition to a general homeowner insurance policy that owners need to explore.

Some homeowners may choose to work with their insurance professional on loss assessment coverage.  However, not all insurance professionals specialize in HOA needs, so owners may need to locate a different agent.  HOA Board members and neighbors are good sources for getting names of insurance professionals who can help owners evaluate how much insurance is needed.

Not all loss assessment coverages are created equally, so it pays to ask questions upfront.  Specifically, it can range from a minimal amount of $1,000 to coverage as high as $50,000. Because it is contingent on the association having proper coverage in place, you need to understand your association’s coverage.

While an HOA Board may suggest that homeowners consider loss assessment coverage, the ultimate decision lies with each owner.  Each person has to decide on his/her comfort level and determine the extent of insurance coverage required.

Why consider loss assessment coverage?  There’s only one answer, and it’s the same for every type of insurance.  Peace of mind.


Wise Property Solutions serves condominium and homeowners associations by addressing their financial, association and facilities management needs. The only certified and licensed community association management firm serving the Mountain South (Virginia, North & South Carolina, Tennessee) with offices in the Tri-Cities and Knoxville.  Wise Property Solutions provides condo and homeowners association management services in Johnson City, TN; Bristol, TN; Kingsport, TN; Knoxville, TN and the surrounding region.

Subscribe here to receive the 10 BEST PRACTICES of every successful HOA

You have Successfully Subscribed!