Is Your Condominium Protected? What Your Need to Know About Insuring Your Condo
Condo living is typically advertised as “hassle-free living” or “you don’t have to worry about anything, just move in and enjoy life.” Then, because life happens, you need to make an insurance claim with your building,
not realizing that your condo corporation’s Master Insurance Policy will not cover your personal items. This leaves you…uncovered!
Before this happens, take the time to understand what type of insurance you need so that you’re covered and can truly enjoy more “hassle-free” living.
Condo Corporation Master Insurance Policy
To help you understand what you are responsible for versus what your condo corporation is responsible for when it comes to insurance, think of turning your condo unit upside down and shaking it. Everything that falls out – your clothes, personal possessions, etc. – is your responsibility. While this isn’t always the case (such as if you make improvements and betterments to your unit, which we’ll discuss later), this paints a general picture of where the divide of insurance responsibility is.
Your condo corporation will have a Master Insurance Policy in place. This will typically insure:
- The building’s structure
- Common property areas and items within these areas, such as furniture and equipment
- What their liabilities are, such as personal liability that happens on common areas of the property
- Director insurance for claims against a Condo’s director
- Who insures unit improvements and betterments
- Fidelity coverage against claims for theft of money, however this is not mandatory.
What’s missing for you personally? Anything that is within your personal unit, storage locker, or any liability claims that are made against you that happened within your personal unit.
Personal Condo Unit Insurance
As the unit owner, it is currently recommended that you insure your personal unit and items within the unit. While policies will differ from province to province and condo to condo (depending on the extent of their Master Insurance Policy), we recommend that you investigate a policy that includes:
- Personal property and contents, such as clothes, furniture, jewellery, artwork, appliances, items in your storage locker, and so on.
- Liability coverage within your personal unit
- Loss of use, in case you are not able to live in your condo due to fire, flood, etc.
- Unit contingency, which is coverage if your corporation’s insurance on your unit’s structure is insufficient. This is often recommended if you make improvements to your individual unit as a typical Master Insurance Policy will cover what the base structure of your unit was.
- Chargeback of corporation’s deductible. this type of coverage is when your policy covers you if there is a chargeback from the corporation’s deductible to you. For example, if you have a flood in your unit that affects another unit, the corporation’s insurance may cover the damages to the common elements and possibly other units, with the cost of the deductible being charged back to you as the unit owner who caused the initial problem. This way, if you’re looking at a chargeback deductible of $25k, you have insurance that will help you cover this.
Of course, if you’re looking to rent out your unit, you can still get a rental condo package insurance policy. This is often the same coverage as above, but instead of the additional living expense / loss of use, you can insure the rental income. This ensures that should you not be able to have a tenant in your space due to a building issue, not simply because of a lack of renter, your insurance policy covers the rental portion that you are used to collecting.
We also recommend that if you are renting your unit out that you require your tenant to have their owner insurance to cover their personal items and property.
Current Gaps of the Condominium Property Act
What should also be top of mind is that the Condominium Property Act (CPA) is currently undergoing changes. One of the areas that needs updating is the focus on insurance because of the confusion around insurance responsibilities. A few areas that are being addressed include:
- Fidelity or crime coverage.
No different from other corporations, a condo corporation controls a lot of money. In fact, some condos have up to $1, 2, or even 3 million whether sitting in their reserve funds or within an operating account. Currently, the CPA does not mandate that insurance is required to cover this money, leaving it open with respect to crimes of fidelity. Without fidelity or crime coverage, the corporation is left unprotected is this money is stolen or misused. As such, this is something that the Government is currently reviewing to ensure that corporations aren’t leaving themselves open by not having the proper coverage.
The current CPA doesn’t necessarily define deductibles. In other words, there is no definition of what a “reasonable deductible” is when a condo corporation needs to charge back a deductible to a unit owner. As such, right now some deductibles are sitting at $25K and up. And, a condo corporation can only charge the deductible back to the unit owner if the corporation’s bylaws allow for this provision. Wordings in a corporation’s bylaws will vary from having to prove negligence to the decision being at the board’s sole discretion. Updates to the CPA are looking to make a larger definition of who can pay the deductible and what is considered “reasonable.”
- Improvements and Betterments
An area that is quite confusing and should be outline in the next version of the CPA is WHO is responsible for insuring any improvements or betterments to your unit. Unless otherwise stated in your condo’s bylaws, if you complete upgrades to your unit, such as installing hardwood floors or granite counter tops, you are responsible for insuring these improvements. This is an area where we have seen confusion so, to make it as simple as possible, refer to your bylaws to see what it says about improvements. If there isn’t anything and you’ve already updated your unit, contact your broker and update your policy to include these improvements immediately.
Ultimately, at the end of the day, you are responsible for your insurance coverage. If you aren’t certain of your condo corporation’s Master Insurance Policy, ask to see it either from your condo corporation or property management company. Note where there may be gaps in your current coverage, particularly around any unit improvements or betterments that you have made. If there are, have a conversation with your insurance broker to see about updating your own personal policy.