When Do You Need Loss Assessment Coverage?

This is a guide to figuring out whether or not you need loss assessment coverage, a home insurance add-on that covers damage to shared spaces. Here's how to find out if you need it, what it covers, and more.
Written by Brady Klopfer
Reviewed by Carrie Adkins
Loss assessment coverage is an HOA add-on to your home insurance that can protect cover damage that occurs in shared spaces.
If you’ve ever signed up for an insurance plan, you’ve probably found yourself overwhelmed by the sheer number of options, and unsure of which (if any) add-ons to choose.
One such option on a homeowners insurance policy is loss assessment coverage. Many people aren’t sure whether or not to add this option, in part because they’re not sure what it is. If that sounds like you, here's what you need to know before making a decision on this kind of coverage! This is everything you need to know about who needs loss assessment coverage, exactly what it covers, and more.
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Who needs loss assessment coverage?

Loss assessment coverage is only for people who belong to a homeowners' association (or HOA). If you don’t own a home that belongs to a homeowners' association, then you can skip loss assessment coverage, as it doesn’t apply to you. (Instead, consider studying up on
renter's insurance
basic home insurance

What is loss assessment coverage?

Loss assessment coverage is a
homeowners' insurance add-on
that covers any damage done to spaces that you share with other members of your homeowners' association.
If you belong to a homeowners' association, then you share some things with the other members, such as a pool, a courtyard, a backyard, a lobby, or an elevator. Loss assessment coverage specifically insures you for those shared spaces. Part of your homeowners' association dues go towards that coverage—so, in theory, you’re protected if something happens to those shared spaces.
However, if the damage to those shared spaces exceeds the homeowners association’s insurance, the financial liability is split evenly between all of the members of the homeowners' association. This means that you, plus your fellow HOA members, are all equally responsible for the repairs.

Isn’t that covered by your standard homeowners' insurance policy?

Not quite! A standard homeowners insurance policy only covers the parts of your home that are owned exclusively by you. Spaces that are shared through your homeowners' association are unfortunately not covered under your insurance plan.
For example, if you own a house with a private pool, then the pool is protected under your basic homeowners' insurance. But if you own a condo in a complex that has a shared pool, then your insurance would not cover any damage to it.
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What’s an example of loss assessment coverage?

Let’s say you own an apartment in a building that has 20 units, and there’s damage to the courtyard in the building. The damage costs $250,000, but your homeowners' association insurance only covers $150,000. That means there’s $100,000 worth of damage left to cover. That cost will be split between the 20 units, which means you would then owe $5,000 to cover the cost of repairing the courtyard.
Without loss assessment coverage, you owe that $5,000 out of pocket. With loss assessment coverage, however, your insurance will cover that cost.

How much does loss assessment coverage cost?

Loss assessment coverage is a very affordable insurance add-on. It usually costs $20 to $60 per year to add this to your homeowners' insurance plan.

Do you need it to buy a home?

It depends on your homeowners' association. Some homeowners' associations require that you have loss assessment coverage before joining, which means you’ll need this type of coverage on your policy if you want to buy the home. However, if it is optional with your homeowners' association (or if the property you’re purchasing doesn’t have a homeowners' association), then you don’t need to buy loss assessment coverage.
Loss assessment coverage is just one of many homeowners insurance options and add-ons, but it can help provide financial comfort to a lot of homeowners.
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How much loss assessment coverage do I need?

It depends on your homeowners' association's master policy limits. Talk to the head of your homeowners' association to find out what the limits are before adding this coverage to your policy!
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