Your condominium policy covers various items:
- Contents or personal belongings.
- Any improvements or betterments you have made to your unit such as new flooring and
- Loss Assessments.
- Loss of use
If anyone tells you that you do not need to purchase condo insurance that is incorrect.
New Maryland Law regarding Condominium Unit Owners Loss Assessments
1. Loss assessment coverage - unit owners
Effective October 1, 2020, a Maryland law took effect that increases 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 a unit owner for a loss assessment was $5,000. The new law increases that amount to $10,000.
How will this change affect you, the condo unit owner? Under the new law if a loss originates inside of your condo unit and causes damage to the condominium structure and neighbors, the association can charge you, the condo owner, an assessment to cover the associations deductible portion of their insurance policy, up to a $10,000 maximum as of October 1,2020. Make sure you speak to your agent and make sure you have at least $10k of coverage for loss assessments to cover this new limit.
2. Loss Assessment Coverage: Assessment to all unit owners for underinsured losses
Specifically, if there is an insurance claim and there is not enough insurance coverage, and the association does not have enough money to cover the insured loss then they can assess all unit owners
to cover these expenses. The first loss assessment only applies to assessments due to damage caused by your unit. This second loss assessment applies only to an underinsured event and all unit owners are assessed equally. Please do not contact your agent when there is a special assessment.
Here’s an example:
Example: A hurricane hits Ocean City and blows the roof off the entire condo building. 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 expense of the claim, they might issue a special assessment to each owner to pay off the rest of the bill. This would be considered a special assessment. In this case, the damage did not originate from a particular unit. Therefore, it is a common expense of the association. A common expense assessment is not covered under the first Loss assessment coverage discussed but it may be covered under the second type of loss assessment.
How do I know if I am covered?
It is best to ask your agent to show you where in the policy your loss assessment is covered, not just listed on your declaration page. Depending on the carrier, the loss assessment coverage may apply to both types of loss assessment. If not, it may be listed in a different place in your policy, usually called Additions and Alterations or Improvements and Betterments. Again, speak to your agent. Insurance shouldn’t be confusing, if you have any questions, feel free to reach out to one of our team at the Halkos agency 301-206-5464