Condominiums are a growing segment of the Canadian housing and real estate market. Earlier this year the Canada Mortgage & Housing Corporation highlighted a 3.7 per cent rise in the creation of condominiums and apartments in Canada, raising the total of condo starts to a whopping 130,933 units. As an owner of a condo myself, it’s easy to see why they’re so popular. Condo living provides a lifestyle that’s low maintenance (good-bye lawn mower and snow shovel!) and it’s an attractive option for both young professionals looking to purchase their first home and empty-nesters who want to downsize.
Living in the right condo can simplify life in many ways, but many of my fellow condo owners find themselves confused about one thing in particular: how to properly insure their property once they’ve decided to purchase it. In many cases, the sentiment I’ve encountered is that since the building they’re living in has a policy, they’re covered under that policy…right? Wrong.
The misconception around what kind of insurance, if any, a condo owner needs looms large over the market. In 2013, Allstate Canada, with the help of Abacus Data, conducted a survey to get a better understanding of what Canadians know about insuring a condo. The findings showed that 74 per cent of Canadians looking to purchase a condo didn’t know what their condo corporation’s insurance would cover versus what their own property insurance would cover.
If condo owners and perspective buyers want to feel secure in knowing they’re fully protected, here are three questions they should ask themselves:
1. What’s the difference between a personal insurance policy and the condo corporation’s insurance policy?
The building/complex you live in is going to have a policy that protects it against damages and liability issues. This will provide you with some coverage, but what many condo owners don’t realize is that they need something that specifically protects them. This is because a condo corporation’s policy only protects specific items in the building or complex.
Condos provide what’s called “a standard unit definition” to all condo owners and you should get to know what is included in yours. It outlines what you’re allowed to change or upgrade in your condo and what components the management are willing to maintain. It also lists items, areas, and scenarios where the condo corporation’s insurance policy would provide coverage, and – more importantly – where it doesn’t – which brings us to the next question…
2. Under what circumstances does my personal property policy come into effect?
Once you’ve figured out where the lines are drawn regarding coverage under the condo corporation’s policy and your own property policy, there’s typically a sense of confusion about the condo corporation’s responsibilities and the unit owner’s responsibilities.
There are cases where owners are surprised to find out they share some responsibility for situations and property losses that they hadn’t considered. Some of those situations include the following:
- Your neighbour’s unit is damaged as a result of flooding or fire from your unit.
- Your car is damaged in the underground parking lot.
- Items have been stolen from common areas like the lobby or exercise room, and they need to be replaced.
- A pipe bursts and the items in your storage locker are destroyed.
- A delivery person is injured in the common area of your condo’s property and files a lawsuit.
Once you’ve thought about situations like these and how they can affect you, then it’s time to consider…
3. What’s the premium and deductible on the condo corporation’s policy for my building?
There’s a relationship between the cost of a premium paid on an insurance policy and the cost of the deductible that is paid when an insurable incident occurs. Generally, the higher the premium is on a policy, the lower the deductible and vice versa.
In some cases, a condo corporation will opt to pay a lower premium (which comes with a higher deductible) and owners are billed for a share of the deductible if it goes beyond what is available in the condo corporation’s reserve fund. If an owner’s policy doesn’t account for this possibility, an owner may find him or herself having to pay the difference out of their own pocket. In some cases, the difference can be significant.
Knowing what the premium and deductible is on the policy of the building or complex you live in can go a long way in making sure you’re adequately covered as an owner. And don’t stop there. Consult with your condo corporation’s management and an insurance professional because there’s always more to consider for your own particular circumstances. Is your policy comprehensive enough to cover any upgrades you’ve made to the unit or to replace all of your items if they were lost or destroyed? Adding up the value of all your belongings may help. Does your coverage make sense for you? If you live on the tenth floor, you might think you can get by without sewer backup coverage – but many condo owners have items stored in sub-basement storage lockers, and flooding caused by sewer backup can also occur many stories above ground.
There’s plenty to consider when it comes to making sure you’re properly protected. But, once you’ve made the necessary inquiries (and changes to your property coverage if needed), then you’ll be better able to relax and truly settle into the carefree life of condo ownership.
Do you have any questions about condo insurance? Please ask us in the comments below.