The proper insurance is critical for those that own or are looking to own a condominium (sometimes referred to as a strata). However, understanding how condo coverage works is not always a straightforward process.
To protect their investment, condo owners must purchase coverage (also known as condo or unit owner insurance) that works in conjunction with a condo association or corporation’s master policy. Condo owners often wrongly assume they do not need coverage because their condo corporation already has a policy.
Failing to purchase a condo or unit owner policy can leave you exposed to gaps in coverage—gaps that could be incredibly costly in the event of a claim. To better understand the need for coverage, it’s important to learn what master and condo policies commonly cover.
Master Policies and What They Typically Cover
Typically, your condo corporation has a master policy that insures all of the property and common areas that are collectively owned by unit owners. Generally, condo corporation insurance covers the following:
- The buildings shown on the condo plan
- Common property such as hallways, stairs, roofs, pools, garages and driveways
- Fixtures built or installed as part of the original or standard construction, including floor and wall coverings as well as electrical and plumbing fixtures
- Condo assets like furniture and equipment
- Liability of the condo corporation for claims of property damage and bodily injury suffered by others
One of the key takeaways is that your condo corporation’s insurance may cover insured losses to the condo building and common property, but it does not cover your personal contents, liability or improvements to your unit. That’s why purchasing additional coverage in the form of condo insurance is so important.
Condo Policies and What They Typically Cover
While having a separate insurance policy for your condo unit is not mandatory, it is highly recommended.
As noted above, a condo corporation’s master policy typically covers common areas. Not only does this limited protection put your personal belongings at risk, but any improvements you make, damage you do to another unit or injuries that occur in your unit will also not be covered.
What's more, in the event of a major disaster (like a pipe bursting in your unit), you could be held liable for the cost of any repairs. Master policies often include language that identifies the owner of the unit where a specific loss began as the individual responsible for the entire deductible. With this cost sometimes exceeding tens of thousands of dollars, condo insurance is a must in order to protect your finances.
Condo insurance typically provides coverage related to the following:
- Contents or personal property. Condo policies will often protect personal property such as clothing, appliances and furniture.
- Additional living expenses. In the event of an insured loss that leaves your condo unit uninhabitable, condo policies may provide policyholders with funds over and above the normal cost of living. This coverage is essential, as condo owners will need a place to live if their unit is ever uninhabitable.
- Third-party liability. Condo policies can provide coverage for your personal liability for any bodily injury or property damage unintentionally caused to others.
- Improvements and betterments. Condo polices provide coverage for any upgrades to your unit (e.g., adding in custom hardwood flooring or custom counters). This coverage is available whether the improvements were made by you or previous owners of your unit.
- Loss assessments. In the event that that your condo corporation’s insurance fails to provide adequate coverage, loss assessment protection kicks in. This protection helps insure common property and liability.
- Contingent coverage. Similar to loss assessment protection, contingent coverage insures your condo unit itself in the event that the master policy fails to protect you or is insufficient.
When it comes to condo insurance, it's important to remember that a condo corporation will seldom protect your personal property or pay for your living expenses if you are displaced following an incident.
As such, before purchasing your unit, it is imperative that you ask for a copy of the condo corporation's insurance agreement. That way you are aware of your responsibilities and the amount you need to pay for any deductibles.
In addition, when meeting with your insurance broker, bring a copy of your condo's bylaws and master policy. This will help in the underwriting process and will ensure that you get the right level of protection.
Depending on the province, condo associations may be required to offer certain levels of protection, and your broker can help you better understand any insurance gaps.
For more information, please contact Suzanne Liberman, Managing Director, Real Estate at ClientFirst@jltcanada.com.