You have just bought your first condominium and move-in is only two weeks away. Most of the renovations will be done, so everything looks good. A colleague has mentioned the need for condo insurance. You aren’t so sure it’s necessary. ‘After all, the condominium corporation has insurance, so why do I have to buy insurance?’
Good question and the answer is important—very important. Although much of the information contained in the section on homeowners’ insurance applies to condominium insurance, there are some special considerations of which you should be aware. Here is a summary of important facts.
Why Condominium Insurance
The condominium corporation’s policy only covers items that are part of the building, including the common areas, parking areas, swimming pool, etc. One advantage of condo living is that you become a shareholder in the corporation from which you “share” access to these common areas.
However, the downside is that you and your fellow condo owners can be held personally liable if things go wrong. Normally the condominium corporation’s insurance will cover any liability and their coverage should be adequate. If however, the condominium corporation is under insured, your insurance policy will cover you up to its limits if there is any shortfall. So condominium insurance coverage is a low-cost way to worry-free condo ownership.
Another important reason that you need condo insurance is to protect yourself against personal liability for injuries to visitors to your home or for damage you accidentally cause to other property including your neighbours’.
In addition, as a condominium owner, you need to insure not only your personal possessions in the condo, but also any unit improvements made by you or any previous owner. Therefore, your condo insurance can also protect the upgrades you make inside your unit, such as new carpets, new kitchen cupboards, appliances, etc.
Additional Living Expense
If an insured peril makes your condo unfit to live in and you have to move out while it is being repaired, your insurance policy will cover any necessary increase in living expenses (including moving costs) so that you can maintain its normal standard of living.
Additional Coverage Available
Whatever type of condo insurance policy you choose, it can be extended to cover secondary and seasonal properties, recreational vehicles, boats and more. Consider these other examples of additional coverage that is available:
If the police or other civil authorities deny you access to your unit as a direct result of damage by an insured peril to neighbouring premises, you may be reimbursed by your insurer for additional living expenses and/or lost rental income for up to two weeks. Additional coverage is sometimes available in the event of mass-evacuation (like a toxic spill from a train wreck).
Home-based Business Insurance
The standard types of condo insurance do not include coverage for home-based businesses. However, you can add to your condo insurance specific liability and business contents insurance. Call us today about this coverage, which costs just pennies a day.
When & How Much Insurance
Insurance coverage on your condominium should begin as soon as you become the legal owner. How much coverage you need depends, in part, on the value of your contents and the costs to replace with new items for contents that may be destroyed by an insured peril.
The checklist below will help you determine your insurance needs. However, it is always important to discuss your needs with one of our insurance agents.
- What is the replacement value of your contents? Use this home inventory form to determine the value of your contents.
- What is the replacement value of unit improvements made by you or any previous owners?
- Does the policy you are considering include broad water damage coverage for problems such as sewer and drain back-ups?
- Do you have expensive personal items such as jewellery or artwork that you may need additional personal property coverage for?
To further help you prepare for your discussion with us, consider these types of coverage:
Loss Assessment Coverage
This coverage is an important element of condo insurance because, as mentioned above, you share responsibility with others for the common property of the condominium corporation.
Let’s say that one of your visitors slips at the swimming pool, bangs his head and dies. If the condominium corporation is sued, their liability insurance will usually cover their legal costs of defense and any possible judgement against them. However, if the condominium corporation is under insured, you may be named in the law suit, as well. In that case, your insurance policy covers you if there is any shortfall in the condominium corporation’s insurance.
Deductible Assessment Coverage
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.
Condominium Owner’s Improvements Coverage
This type of policy covers additions, alterations, fixtures, improvements or installations made by you or acquired at your expense to your unit. This is an important consideration because many policies have standard limits that may not be high enough to cover replacement costs for upgraded floor coverings, or built-in cabinetry or expensive entertainment units. Therefore, it may make sense to buy additional coverage.
Contingency Insurance Coverage
This policy extension enables you—in the event that your condo suffers fire, water or some other damage—to restore your condo to its original condition if the condominium corporation has inadequate or no insurance.
The insurable perils in condo insurance policy can include:
- Fire, lightning, explosion
- Smoke (but not from a fireplace)
- Vandalism while building is normally occupied
- Windstorm or hail (contents are covered only if storm has first created an opening in a building)
- Water escape from, or rupture or freezing of, a plumbing, heating, sprinkler or air-conditioning system or domestic appliance
- Impact by vehicle or aircraft
- Glass breakage in a building that is normally occupied
- Transportation (of personal property that is temporarily removed from your home)
- Falling objects (not including objects propelled by snow slide or earth movement)
It should be noted that the “water escape” peril is an insured peril that excludes floodwaters (i.e. overflowing creek), water seepage that is repeated or continuous (from a cracked wall, perhaps), malfunctioning sump pumps, leaky eaves troughs and downspouts. Sewer back up is excluded unless specifically added to your insurance policy.
Your policy will not normally cover damage caused by freezing that occurs during the usual heating season if you have been away from your premises for more than four consecutive days. However, if you had arranged for a competent person to enter your home daily to ensure that heating was being maintained and everything else is in good order, then you would still be insured.