Many condo owners assume their condo fees cover all potential costs, but that’s not always the case. One major expense that can unexpectedly fall on unit owners is loss assessment—and without the right condo insurance policy, you could be on the hook for thousands of dollars.

What is Loss Assessment?

Loss assessment refers to the cost a condo corporation may pass down to unit owners when a financial shortfall occurs. This happens when a claim exceeds the condo corporation’s insurance limits, the deductible is too high, or certain damages aren’t covered by the condo’s master policy.

When Can Loss Assessment Be Applied?

Here are some real-world scenarios where loss assessment could impact you:

• Damage to Common Areas – If a fire, flood, or storm damages shared spaces like hallways, lobbies, or the roof, and the condo corporation’s insurance isn’t enough to cover the repairs, unit owners may be required to pay part of the cost.
• Master Policy Deductible Costs – If the condo corporation files a claim but has a high deductible (e.g., $50,000+), that amount may be divided among all unit owners.
•  Liability Claims Against the Condo Corporation – If someone gets injured in a common area and sues, any uncovered costs could be passed down to unit owners.
• Unexpected Special Assessments – Some condo corporations don’t have enough financial reserves to handle major repairs, leading them to impose additional costs on unit owners.

Why Condo Insurance Matters

A personal condo insurance policy typically includes Loss Assessment Coverage, helping to protect you from these unexpected expenses. Without this coverage, you could be forced to pay thousands of dollars out of pocket for damages that aren’t even inside your unit.

Loss assessment can be an unpleasant surprise, but the right condo insurance policy ensures you’re not left covering costs that should have been insured. Make sure you have the right protection in place before it’s too late!

Loss Assessment Limits Vary by Condo Corporation

It’s important to note that each condo corporation may have a different limit for loss assessment coverage. While many condo corporations typically set the limit at $25,000, others may have higher limits such as $50,000, $75,000, or even more. We’ve noticed few buildings close to Lake Ontario have $100,000 limit!

Older buildings or those facing financial challenges may have higher limits, as they might be more prone to larger claims or repair costs. In these cases, the condo corporation might require higher assessments to cover potential shortfalls, which could leave unit owners facing a larger financial burden.

Because of this variation, it’s essential to check your condo corporation’s specific loss assessment limit. Understanding the limit will help you determine if your condo insurance policy offers adequate coverage. It’s always better to be prepared with a policy that includes loss assessment coverage tailored to your building’s unique needs. Keep in mind that you can contact your insurance provider and increase your limit if necessary.

The Importance of Sewer Backup Coverage

One often overlooked issue is sewer backup. If the damage to a common area (such as the building’s lobby or hallway) is caused by a sewer backup, it’s crucial for condo owners to make sure their personal condo insurance includes sewer backup coverage.

Why? If your condo insurance policy doesn’t cover sewer backups, you may be at risk of paying out-of-pocket for the loss assessment deductible. This is because some insurance policies may not apply loss assessment coverage for specific types of damage, such as sewer backups, unless you have the proper coverage in place.

It’s a tricky situation, and to avoid unexpected costs, condo owners should always check with their insurance companyto ensure their policy includes sewer backup protection. This simple step could save you from a financial headache if the worst happens.