Homeowners Association (HOA) assessments are fees that homeowners within an HOA-governed community must pay in addition to their regular dues. An HOA assessment, sometimes referred to as a special assessment, is a one-time or temporary fee imposed on homeowners by their association. HOA assessments can come at the most inopportune times. Many policyholders do not financially plan for this financial burden. An HOA may request assessments when they do not have proper funds in their reserves to cover the costs involved in repairing or improving the common HOA property. An example would be that the community needs new roofs or sidewalks and common areas need updating or repair.
What Triggers HOA Assessment Coverage?
Loss assessment coverage is an optional add-on to a standard homeowner’s insurance policy that provides protection against special assessments levied by your HOA. This limit of coverage will pay for your assessment fee’s you’re required to pay as part of the HOA. HOA assessment coverage is specifically stated when it triggers in your policy. Most insurance policies trigger the date of the letter from the HOA was sent out to the property owner. Please note, some policies may be from the date of loss. To claim insurance on an HOA assessment the damage must be from a named peril. Meaning that if common roofs had hail damage or a hurricane then this would be covered. If the community wanted to spruce up the common pool area this is not a covered claim.
In a recent insurance policy review, a policyholder had AllState and this policy was in effect during the date of loss and triggered when the HOA assessment letter was sent out. After their policy period had ended, they switched to State Farm which unbeknown to them, only had coverage that triggered from the date of loss. The assessment letter was sent out a year after the loss in which the policyholder did not have coverage in effect for either policy.
When Should an HOA Send Out Assessment Letters?
We had an HOA client in Minnesota with many buildings. Unfortunately, they were underinsured and had an ACV policy. After we recovered the hail damage insurance claim, the HOA had to come out of pocket for the remainder of the payment to get the roofs done. The HOA board wanted to wait to send out the assessment letter because they didn’t want to scare the property owners. Prime Adjustments advised the board to send it ASAP as there may be a lapse in coverage for their policyholders.
Our Colorado public adjusters worked another hail insurance claim and the HOA board waited 3 years to send out their assessment letter. By this time there were new residents that received the assessment and those that had State Farm did not qualify for coverage.
It is important to know exactly what your HOA assessment coverage entails and to review your policy for loss assessment coverage. If you have any questions regarding your assessment or if you would like Prime Adjustments to review your coverage, please call us today.
