Insuring a condominium unit is complicated by the fact that there are two parties involved: 1) you, the owner of the unit, and 2) the strata corporation. Strata/Condo Master Insurance policies provide coverage for the building and its common areas such as hallways, elevators, swimming pools, and any associated out-buildings, however there are many assets and situations that are simply not covered by the Strata/Condo Corporation’s Master Insurance policy. Let’s explore a few:
Your personal property such as furniture, electronics, clothing and even your appliances are not covered under the Strata/Condo Master Insurance policy. You need to purchase a separate condo insurance policy to cover these assets. Taking the time to prepare an inventory of your possessions and purchasing the appropriate coverage can prove invaluable in the event of a large loss.
If someone slips on a wet floor in the bathroom in your unit and suffers injury, any claims brought against you would not be covered by the Strata/Condo Corporation’s Master Insurance policy. Or, you may accidently leave a tap running which causes water damage to the contents in the unit below. Again, this would not be covered under the Strata/Condo Corporation’s Master Insurance policy. In fact any claims brought against you personally or a resident family member for bodily injury or property damage would be your own responsibility. Therefore, personal liability insurance is essential to ensure that you are in a position to pay for any resulting settlements, or even for the court costs to defend yourself against an unjustified claim.
Loss, Unit and Deductible Assessments
Strata/condo corporations insure all buildings within the complex, including common areas, through a Master Insurance policy. Because the common areas of a condominium complex (sidewalks, lobbies, hallways, exercise rooms, swimming pool, meeting and party rooms, etc.) are available for the shared use by all unit owners, there is a shared responsibility amongst all owners when a claim is made against the Strata/Condo Corporation’s Master Insurance policy. How does this shared responsibility work in the context of insurance?
Scenario One: A visitor slips on one of the condo complex’s sidewalks because the snow and ice have not been cleared. The visitor bangs his head, is seriously injured and unable to work. If the strata/condo corporation is sued, their liability insurance will usually cover their legal costs and any possible judgment against them. However, if the financial value of the claim is very large and the strata corporation is underinsured for the amount of the judgment, each unit owner is now assessed to cover the shortfall.
Scenario Two: Some strata/condo corporations purchase Master Insurance policies that have a very high deductible (i.e. $100,000), for property claims. Again, each unit owner can be assessed to pay a portion of the deductible when a loss occurs and a claim is filed. It is also quite common for one unit to be assessed the entire deductible if the owner is considered responsible for the damage or loss.
Scenario Three: Some strata/condo corporations fail to buy enough insurance to rebuild at today’s construction costs. Should the building suffer a serious loss, and the strata/condo corporation’s level of coverage is inadequate—each unit owner would be assessed to pay a portion of the cost to rebuild.
Betterments and Improvements
When purchasing a condominium unit, you are buying the unit—with its improvements. However, the Strata/Condo Corporation’s Master Insurance policy provides coverage for the unit as it was originally built by the owner developer. Therefore, any upgrades to the unit by you or by previous owners, such as lighting fixtures, air conditioners, flooring, kitchen and bathroom cabinets, countertops, floor and ceiling moldings, etc., requires your own coverage, referred to as “Betterments and Improvements.”
While condominium laws require that the strata/condo corporations have their own insurance that protects the structure and common areas of the building, upgrades are almost always excluded from the Strata/Condo Corporation’s Master Insurance policy. Therefore, as the unit owner, you need to ensure that any alterations or additions to your unit have sufficient insurance protection—regardless of who made the improvements.
Additional Living Expenses
In the event of a valid claim that renders your condo uninhabitable for an extended period of time, you will be required to find alternate living accommodations. Renting a new temporary residence while still keeping up with the mortgage payments on your condo could prove financially impossible. A condo insurance policy will pay your “additional living expenses”, allowing you to stay financially afloat without having to crash on your cousin’s couch for six months.
That is why it is essential that condo and townhouse unit owners purchase their own insurance coverage called a Condominium Unit Owner’s Insurance Policy to fill in the serious gaps in coverage that exist when relying on the Strata/Condo Corporation’s Master Insurance policy alone. With an appropriate Condominium Unit Owner’s Insurance Policy you can protect yourself from all of the scenarios described above and more.
Protect your assets and become familiar with what is and what is not covered under your Strata/Condo Master Insurance Policy, and then fill in the inevitable gaps with an appropriate Condominium Unit Owner’s Insurance Policy .
At Park Insurance, we believe in offering our customers more than just insurance policies, we offer our customers insurance expertise. We encourage you to call or visit us with your condo insurance questions, we are here to help.