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How to Prevent a Disaster: Condo-Unit Owners Part 2 – Loss Assessment

How to Prevent a Disaster: Condo-Unit Owners Part 2 – Loss Assessment

The Importance of Loss Assessment Coverage

Simply stated, loss assessment coverage helps pay the condo-unit owner’s share of covered assessments that the homeowners association may levy on its members to pay for earthquake-damage and repairs or a master-insurance-policy deductible. For example:

An earthquake causes $3,000,000 in damage to the 40-unit condominium building where your policyholder owns a condo unit. Assuming the association’s master policy will only pay up to $1,000,000 of the total, that means the remaining $2,000,000 is being split between all the condo owners through a special assessment. Your policyholder would have to pay the homeowners association their share of the assessment, which is $50,000.

If your policyholder’s CEA earthquake insurance policy doesn’t include the optional loss assessment coverage, he would be responsible for paying the $50,000 out of pocket.

Avoiding Financial Disaster

Whether an earthquake damage assessment is $50,000, $10,000, or even $5,000, it can quickly turn into a financial hardship for many people. While the insured may not lose his condo unit in the damaging earthquake, if he can’t come up with the money for the assessment, it is possible he could lose it from foreclosure.

Of course, this is only a hypothetical scenario. Earthquakes are unpredictable, and so is their damage. Scientists say the next big one is overdue—and if an earthquake does cause extensive damage, CEA Loss Assessment coverage can be there to financially protect your policyholders and help them recover.

Loss assessment covers the insured’s share if his association imposes an assessment for covered earthquake-damage. Coverage limits up to $100,000 are available with deductible options ranging from 5% to 25% of the Loss Assessment coverage limit.

Protect Your Policyholders with Loss Assessment Coverage

Don’t let your policyholders get caught off guard.

Being a member of a homeowners association means that your policyholder will share the expenses with the other members, so be sure to discuss CEA Loss Assessment coverage with your clients and help them decide if this optional coverage is right for their situation. Show them the coverage limits and deductibles available from CEA that provides the best coverage and the most peace of mind for their particular situation.

For more information, see the CEA Condo Unit Policy Sample. And if you haven’t already, be sure to take CEA’s free agent training for more information and insights into CEA’s Loss Assessment coverage.

As always, you can contact CEA’s Information Desk at (888) 423-2322 for help answering your loss assessment coverage questions.