Start the New Year Right: Why Condominium Owners Need Insurance

by Audrey Loeb

Condominium insurance can be confusing, even for professionals, but it is essential that every condominium owner understands what’s covered and what isn’t.

A Quick History

Originally, condominium corporations only insured shared spaces and assets. Individual owners were responsible for insuring their own units.

That changed in 1976, when the Condominium Act was updated. Since then, condominium corporations are required to insure not just the common areas and assets, but also the individual units. This insurance is paid for through common expenses collected from all owners, and it covers everyone under one policy.

What the Condominium’s Insurance Covers

The Condominium Act requires the condominium corporation to insure:

• Common elements (like hallways, lobbies, and amenities);

• Corporation-owned assets (like equipment);

• Individual units — up to the standard unit definition; and

• All of these elements must be insured to full replacement cost.

The board is responsible for making sure the property is regularly appraised to stay compliant with insurance requirements.

The policy must cover common risks like:

• Fire;

• Flood;

• Wind damage;

• Sewer backup;

• Vehicle impact; and

• Plus any additional risks listed in the condominium’s declaration or bylaws.

When Damage Happens

If there’s an insured loss, the condominium or its insurer will pay to repair the damage with two important conditions:

1. Deductibles apply. A deductible is a set amount of money the corporation will have to pay out-of-pocket for a covered insurance claim before the insurance company starts to pay. These vary by type of damage. Water damage, especially in high-rises, often has the highest deductibles (usually around $25,000 but sometimes as high as $250,000 to $500,000). In some cases, the corporation can charge the deductible back to the unit from which the damage was caused; and

2. The condominium’s or its insurer’s responsibility is limited to the “standard unit.” This means the corporation only has to restore the damaged unit to the level set out in the standard unit definition or bylaw if one exists or its original condition or when the building was registered, if built before May 2001 and no Standard Unit bylaw has been passed by the owners.

   
   

This leaves a gap between what the condominium covers and what the owner is responsible for.

Why Owners Must Have Their Own Insurance

All owners should carry insurance to protect themselves. Here’s what it should cover when there is a loss:

1. Upgrades and improvements to the unit not included in the standard unit;

2. Personal belongings (furniture, electronics, clothing, wallpaper, upgraded kitchens etc.);

3. Liability coverage if someone is injured in your unit;

4. Deductibles that the corporation may charge back to you;

5. Relocation costs if your unit becomes uninhabitable;

6. Special assessments if the corporation’s insurance is not enough to cover repairs for damage caused by an insured peril; and

7. Loss of rental income and relocation costs for tenants, if you rent out your unit.

Condominium insurance is a shared responsibility—but it’s not one-size-fits-all. Make sure you are protected where the corporation’s policy ends. Owners should consider insuring their units with the same insurer who insures the condominium. This should ensure that there are no gaps in coverage between the corporation’s and the owners’ insurance coverage.