Condominiums are a growing segment of the Canadian housing and real estate market; and we can see why. Condo living provides a lifestyle that’s low maintenance (no mowing the lawn or shoveling your driveway) and it’s an attractive option for young professionals looking to purchase their first home, empty nesters who want to downsize and many people in between.
However, with condos growing in popularity and many opting for one in a major metropolitan, the question of how to properly protect your unit should be top of mind. The condo building owner should have an insurance policy, but there’s a lot that it won’t cover – including the contents within your unit.
If condo owners and perspective buyers want to feel secure in knowing they’re fully protected, here are four questions they should ask themselves.
Can you own a condo without the condo being insured?
Like home insurance, condo insurance is not mandatory. However not only would we recommend insuring your condominium, if you plan on taking out a mortgage your bank may require you to provide proof of insurance.
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 additional protection. 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 your condo insurance protects and won’t protect. It outlines what you’re allowed to change or upgrade in your condo and what common elements that management is 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…
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 liability coverage 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 because of flooding or fire from your unit.
- Your car is damaged in the underground parking lot.
- Common property was stolen from common areas like the lobby or exercise room, and it needs 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…
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 charged for a special assessment, which is a 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 have to pay the difference out of their own pocket. In some cases, the difference can be significant.
Having knowledge of the costs associated with your condo’s insurance policy can help ensure you are fully protected. Speak with the condo management and an insurance expert for further advice, as there may be additional considerations depending on your specific needs.
Are you sure your condo insurance is adequate to cover any improvements you’ve done to the home or replace all of your possessions if they were lost or ruined? Knowing the total worth of your possessions may help. Is this coverage enough for you? Even if you stay in a higher floor, you could still be affected by sewer backup, which can happen in the upper floors and in the storage lockers in the basement.
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 life of condo ownership.
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