What happens if the HOA's insurance is insufficient?

Complete Guide to HOA Insurance Gaps & Loss Assessment

Why This Question Matters for Colorado and Utah Residents

Condo and townhome owners in Colorado and Utah often face the financial shock of special assessments when severe weather or unexpected events overwhelm the HOA’s insurance. With nearly 68% of owners underinsured for loss assessments (according to CO market stats), understanding your own exposure is crucial. Regional risks like hailstorms, wildfires, and rapidly rising reconstruction costs mean that HOA master policy limits frequently prove inadequate—sometimes leaving every owner on the hook for thousands.

• High local claim rates: Northern Colorado and Utah see frequent severe hail, water, and wildfire claims, pushing master policy limits.
• Large HOA deductibles: New Colorado rules mean master policy deductibles often exceed $10,000, shortfall paid via owner assessments.
• HOA insurance shortfalls are common: Special loss assessments after severe events average $2,500–$15,000 in CO/UT.

What Most People Get Wrong

Many believe the HOA’s master policy “covers everything”—but most only protect the building’s shell and shared spaces. Owners frequently underestimate how much can be assessed back to them individually when claims exceed those limits, particularly after hail, water, or wildfire losses. Only about a third of local condo owners have enough loss assessment coverage to prevent severe out-of-pocket costs.

Another misconception: assuming loss assessment is "automatic" on every condo policy. In Colorado and Utah, you must select appropriate limits—often $10,000–$25,000 or even more—to align with your HOA’s deductible and local risk factors.

The Complete Picture

Your HOA typically insures building exteriors and common spaces via a master policy. But when the cost of damage (for example, after a major hailstorm or wildfire) exceeds that policy’s coverage or deductible, the association splits the shortfall among unit owners as a "loss assessment." This occurs for both property damage and liability claims involving common areas. If you have loss assessment coverage on your HO6 (condo/townhome) policy, your insurance may cover some or all of these charges—up to your policy limit, after deductible.

Given the rising frequency and severity of weather events, and with Colorado/Utah’s average loss assessments ranging $2,500–$15,000, securing the right amount of loss assessment coverage isn’t just a smart move—it can be a financial lifesaver. Always review your HOA documents for deductible amounts and work with a local insurance advisor to match your personal coverage to your actual risk. In Colorado, 2024 rules require loss assessment coverage of at least 40% of dwelling coverage for most HOAs—so review and update regularly.

Making the Right Decision for Colorado and Utah Residents

Question 1: Does your personal loss assessment coverage align with your HOA’s master policy deductible?

Many Colorado HOAs now have master policy deductibles of $10,000–$25,000 or more. Have you checked if your loss assessment limit will truly cover your share?

• Review your HOA’s annual insurance disclosures—ask the board for the latest figures.
• Contact your agent to adjust your coverage to match your true risk—not just a default amount.

Question 2: What special risks are common in your community?

Is your building in a hail corridor (Denver, Fort Collins, or Boulder), near wildfire zones (Foothills, Park City, or Colorado Springs), or subject to frequent water/sewer backups? These regional risks mean higher odds of master policy gaps and special assessments.

Question 3: How will you handle a $10,000+ special assessment if disaster strikes?

Could you pay that out-of-pocket, or would you rather your insurance handle most of it? Set your loss assessment limit accordingly—talk to FoCoIns for a local, honest assessment of your specific risks and optimal coverage options.