Condo insurance has several interesting features. In addition to the general rules for home insurance, here are five key points to consider when shopping for or renewing condo insurance.
1- Two separate insurance policies
There are two separate types of insurance policies for co-ownerships (condominiums):
- The insurance held by the syndicate of co-owners (condo corporation): Mandatory insurance covering the building, common portions and the original plans and specifications of each condo unit. The condo corporation is required to take out this type of insurance, and you pay a share of the premium out of your condo fees.
The condo corporation is also required to take out liability insurance. As of April 15, 2021, liability insurance covering the persons responsible for seeing to the proper conduct of the condominium, such as the members of its board of directors, will also be mandatory.
- The insurance held by you as a co-owner (condo unit owner): Personal home insurance covering your personal (movable) property and any improvements to the condo unit. It also includes liability insuranceCivil liability insurance is insurance that can cover the cost of certain types of damage for which the insured may be responsible. For example, if you accidentally set fire to the building where you live or if your dog bites someone..
Remember! Your personal home insurance is just as important as the insurance taken out by the condo corporation. Carefully review the coverage provided by each policy.
2- Improvements: Make sure everything is covered
The condo corporation’s insurance covers only the original plans and specifications for your condo unit. Anything not included in the original plans and specifications is considered an improvement and must be covered by your personal home insurance. Here are two examples of improvements:
- When buying a new condo, you decide to install wooden kitchen cabinets instead of the melamine ones offered by the contractor
- When renovating the bathroom, you decide to replace the moulded plastic shower stall with a ceramic one
Don't forget: Any improvements to your condo unit must be covered by your personal home insurance. Your condo corporation should have a description of the original plans and specifications for your condo unit, i.e. the standard unit or reference unit. This description will help you figure out the value of the improvements to be covered.
Remember! Check that the insurance amounts offered by your personal home insurer are sufficient to cover all improvements.
3- Damage to the co-ownership: You could be held liable
You could be held liable for damage to the condominium. The civil liability portion of your personal home insurance could be used to repay amounts claimed by your condominium corporation or another condo unit owner.
The civil liability portion of your personal condo insurance is just as important as the portion that covers your unit and personal property. Check if the amount offered by your insurer meets your needs and any requirements under the law, i.e., a minimum of $1 million for condominiums with fewer than 13 units and a minimum of $2 million for condominiums with more than 13 units.If you already had this insurance coverage on October 15, 2020, these minimum amounts will only apply when your policy expires or as of no later than October 15, 2021.
4- The deductible: Don’t overlook it
The deductible is the amount assumed by you in the event of a loss. For example, if you claim $2,000 from your insurer for theft of your personal property and the deductible under your insurance contract is $500, the insurer will reimburse you for only $1,500. Choose a deductible you’re comfortable with, based on the insurance premium you’re prepared to pay.
The condo corporation’s deductible shouldn’t be overlooked either. This deductible is even higher, often by tens or even hundreds of thousands of dollars! Condo corporations are required to have a self-insurance fund in place as of April 15, 2022. Many condo corporations will be setting up such a fund before this deadline, if they haven’t already done so. In the event of a loss, this fund will be used to pay the condo corporation’s deductible or the amount disbursed by the condo corporation should the insurance indemnity and contingency fund not be sufficient.
Remember! Check whether the condo corporation has already established a self-insurance fund and whether there will be enough in the fund as of April 2022.
5- You aren’t protected from having to pay a special assessment
The common portions of your condominium have been affected by a loss? In some cases, your condo corporation may ask you to pay a special assessment (an amount of money to be paid on top of the monthly condo fee) to help cover the cost of repairs.
Here’s one example of a situation that could occur: Water leaks into the common portions of the condominium and causes $200,000 in damage. The condo corporation’s deductible for this type of loss is $100,000. However, there’s only $30,000 in the self-insurance fund. The condo corporation charges each co-owner a special assessment representing a portion of the remaining $70,000 payable for the repairs to the building.
Do your homework: Your personal home insurer may include coverage for certain types of special assessments. To benefit from this coverage, however, you must be insured against the same type of loss for which an assessment is being claimed.
Have you considered all the coverage available?
Pierre lives on the sixth floor of a 36-unit condo building. He didn’t buy sewer backup coverage from his personal insurer because he thought there was no risk of such an incident occurring. The sewer backs up and the common portions of the building’s basement are damaged. The insurance for the building is not sufficient to cover all the damage. The condo syndicate therefore claims a special assessment from all the co owners to make up the shortfall.
Pierre files a claim with his personal insurer for the amount of the special assessment. The insurer denies his claim because he didn’t take out sewer backup coverage.
Remember! Pay special attention to all the coverages provided by your personal home insurer if you specifically want to be covered in the event of a special assessment.