Condo insurance is not the same as homeowner or tenant insurance. Doing some homework before buying condo insurance can help you make a more informed decision and avoid problems. 

Two insurance policies

Condo insurance consists of two policies:

  • Insurance for the syndicate of co-owners (condo syndicate): Mandatory insurance that covers the building, common portions and the original plans and specifications of each condo unit. The condo syndicate must buy this insurance, and you pay a share of the premium through your condo fees.
  • Co-owner’s insurance: Personal insurance that covers your personal (movable) property and any improvements made to the condo unit.

That’s why two insurers often become involved when a loss occurs.

What is an improvement?

The condo syndicate’s insurance does not cover improvements to the original plans and specifications of your condo unit, which means any loss affecting improvements made at the time of construction or as part of subsequent renovations will be covered by your personal home insurance.

Example when buying

When buying your new condo unit, you decided to install wood cabinets instead of the melamine ones proposed by the contractor. This increased the purchase price of your unit by $6,500. If a loss were to occur, this particular portion would be covered by your personal home insurance policy.

Example when renovating

You decide to renovate your bathroom. Initially, it had a molded plastic shower stall, but you’re considering replacing it with a ceramic shower stall and having a double sink put in at the same time. And you don’t want to skimp on quality, opting for a granite countertop, imported ceramic and high-end faucets and fittings. Your personal home insurance policy will cover the difference in monetary value between the improvements and the original bathroom fixtures.   

Original plans and specifications versus improvements

Since December 13, 2018, syndicates of condos established on or after June 13, 2018 have been required to keep a description of each condo unit at the disposal of the co-owners.  Syndicates of all other condos will have to comply with this requirement as of no later than June 13, 2020. The description must provide all details of the original plans and specifications of each condo unit. Anything not included in the detailed description of your condo unit will be considered an improvement and will have to be covered by your personal home insurance.

Insight

Do you have sufficient coverage?

Make sure the insurance provided by your personal home insurer is sufficient to cover all improvements.

End of the insight

Civil liability insurance

Your personal home insurance (co-owner’s insurance) includes civil liability insurance in the event of damage or injury caused involuntarily to others. This could be useful in the event of damage caused to the condo building and also provides protection if you accidentally cause damage or injury outside your home.

The insurance for the condo syndicate should include civil liability insurance for the condo syndicate and its directors.

Do your homework

Are the improvements made to your condo unit covered?

  • Review the declaration of co-ownership to determine which insurance applies for each part of the building.
  • Find out what improvements were made when your condo was built and that have been made in the years since then by consulting the description of your condo unit kept at the disposal of the condo owners by the syndicate, If your condo was established on or after June 13, 2018, you can already do this; otherwise, you will be able to do so as of no later than June 13, 2020.
  • Check the coverage for improvements provided by your insurer and, if it’s not enough, increase it.

Does the syndicate have enough insurance coverage?

  • Check whether the coverage provided in the insurance policy of the condo syndicate matches the replacement value of the condo building and whether the amount of civil liability insurance is sufficient.
  • Take note of the deductible in the event of a claim by the condo syndicate.

If there’s insufficient insurance, the co-owners may need to pay a special assessment. Also, if you’re considering becoming a director, make sure the condo syndicate has taken out civil liability insurance for its directors.

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 are damaged. The building insurance coverage is not sufficient to cover all the damage. The condo syndicate therefore imposes a special assessment on 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.

The takeaway: Pay close attention to all the coverage provided by your personal home insurer  if you want to be protected, particularly against special assessments.