If a condo building requires extensive repairs to common areas, a condo association may request a special assessment. Contractors will evaluate the work that needs to be done and provide an estimate of the costs. In some cases, the cost of the work may exceed the monetary reserves the condominium corporation has on hand or their insurance limits, and the remainder of the costs will be solicited from the unit owners in the building.
Special assessment coverages are usually part of a personal condo insurance policy and protect the owner from a covered loss if it exceeds the condo corporation’s insurance coverage limits. Special assessments are designed to cover losses that affect the common areas of a condo building, such as hallways, parking garages, recreational areas, lounge areas, and anything that does not belong to an individual condo owner. Because condo units are built close together, damage that starts from one area can easily spread to neighbouring units and common areas.
For special assessments coverage to take effect, 3 criteria need to be fulfilled:
The damage or loss is caused by a peril covered by the condo owners policy.
The condominium corporation’s insurance coverage falls short of covering the damages from the loss.
The condo board issues a special assessment to meet the expenses required to repair the building.
If the condo board authorizes a special assessment, the special assessment coverage could then take effect and cover your portion of the repair costs subject to policy limits.
When getting a condo insurance quote, your insurance agent may recommend additional coverage amounts for special assessments to protect you from these rare but potentially expensive scenarios.