A condo corporation can bill an owner for a special assessment, a share of an insured loss or an owner-specific chargeback. Condo policies treat these three charges differently.
In short, loss assessment coverage bridges your personal condo insurance and the building’s coverage.
To prepare this article, we reviewed the Condominium Authority of Ontario’s special-assessment guide, its chargeback guide, its repairs-after-damage guide, and its status-certificate guide.
Why Do I Need Loss Assessment Coverage?
Most condominium developments have a master policy that covers major building-related expenses up to a point. Even large insurance plans covering an entire building have coverage limits and deductibles. If repair costs are not fully covered, condo owners may need to pay out of pocket.
In these cases, the condo corporation may conduct a special assessment to determine how much each unit owner must pay to cover the expenses. An owner’s share is usually based on the percentage used to calculate common expenses, as set out in the corporation’s governing documents.
Condo policies may include loss assessment coverage, subject to the policy wording and limits. Master policies can have significant deductibles, and some expenses may not be fully insured.
In short, loss assessment coverage bridges your personal condo insurance and the building’s coverage.
How Loss Assessment Coverage Works: A Concrete Example
Sometimes it can be difficult to visualize exactly how loss assessment coverage works, especially because it’s unique. Here’s an example scenario to help you understand:
Let’s say you have a condo insurance plan with a loss assessment coverage add-on. Now let’s say that a big fire damaged a significant part of the building’s lobby in a freak accident, and the condo’s master policy has a $100,000 deductible. In this case, the condo corporation would conduct an assessment to figure out how much everyone needs to pay.
If, in this instance, you live in a condo complex with 50 equal common-expense shares, then the $100,000 would be split between all condo owners. You and every other unit owner would have to pay $2,000 to help with repair costs. If your loss assessment coverage applies, your insurance company may cover the $2,000, subject to your policy’s limits and deductible.
More Examples Of How Loss Assessment Coverage Works
| Situation | Likely starting point | Document that decides |
|---|---|---|
| Fire damages common property | A property loss assessment may apply if an insured amount is validly allocated. | Coverage adjustments include master adjustment, declaration allocation and unit property loss-assessment wording. |
| Visitor is injured in a common area | A liability assessment may apply only if the corporation has a covered liability loss and the unit wording responds. | Check the liability claim, master policy and unit liability loss-assessment wording. |
| Owner’s appliance damages units | Possible owner liability, unit damage or deductible chargeback issues. | Check cause evidence, declaration and bylaws, master deductible and unit liability or deductible coverage. |
| Concrete repair from gradual deterioration | These situations are typically maintenance or reserve-fund issues instead of a covered, sudden loss. | Check the engineer report, board records and corporation budget. |
Read More: See How Condo Fire Insurance Splits Responsibility
Standard Unit, Improvements And Common Elements
After an insured damaging event, the corporation is responsible for repairs to the standard unit and the common elements as per Ontario law and the corporation’s governing documents. Unit owners should have insurance to cover improvements and/or contents, liability, additional living costs, and potentially assessment liabilities.
A standard-unit definition may exclude certain improvements and/or interior finishes. Rather than using a checklist, refer to your standard-unit definition, as owners can easily misjudge what counts as part of the standard unit.
Tips To Follow Before Purchasing Loss Assessment Coverage
1. Check Your Condo Master Policy
Review coverage limits and deductibles to understand your exposure to financial risk in the event of a large loss. Some policies have differing deductibles for certain perils, such as water, sewer backup and earthquake. Review these amounts.
If you’ve been provided with a certificate of policy, remember this is just an overview; request more information to clarify anything you need when deciding on coverage for your unit policy.
2. Consult With Your Insurance Provider
Provide the declaration, definition of a standard unit, deductible bylaws, any written assessments and the current master certificate to your insurance provider so they can determine separate limits for property loss assessment, liability loss assessment and corporation-deductible assessments.
3. Understand Your Financial Exposure
Think about the largest master deductible that could be allocable to you as a unit owner and compare it to the sublimit on your own policy for your unit. Also consider special assessments that might NOT be insurable.
Each of these is a different emergency fund decision.
4. Use The Status Certificate Before Buying
Before you buy a condo in Ontario, get the condo’s complete status certificate, including the declaration, bylaws, rules, budget, financials, reserve-fund info, assessments, insurance certificate, and legal action, and have your condo lawyer review it.
Even if, for instance, the certificate of insurance looks ok, that doesn’t mean there’s enough money in the reserve fund or that there won’t be a special assessment in the future.
Read More: Review Condo Fees, Reserve Funds and Special Assessments