Condominium purchases in Canada are on the rise. According to the Canadian Mortgage & Housing Corporation (CMHC) the new construction of multi unit housing developments (condos) rose by 3.7 per cent in 2015, and why wouldn’t it? Condo ownership provides a care-free lifestyle that most often eliminates the need for any lawn mowing, gardening, or snow removal. It’s also an attractive option for both first time home buyers and empty-nesters who are looking to downsize.

This condo lifestyle can simplify life in many ways, but one thing that leaves many condo owners confused in particular: how do you properly insure your property once you purchase it? This question can be a tough one to answer sometimes, and every condominium corporation can be setup differently. For instance, what did you actually purchase when you bought your condo unit? Are you responsible for the light fixtures, heating and cooling systems, exterior walls, and exterior siding? If you are asking yourself these questions, you are not alone. In fact, a recent study conducted by Abacus Data found that, “61 per cent of Canadian condo owners don’t know or incorrectly assume their building’s insurance will cover damage to another unit from water or fire that originated in their unit.”

If you are a condo owner or are a perspective buyer, there are three questions that you need to ask yourself in order to correctly assess your exposures, and to make sure you’re properly covered:

1. What’s the difference between a personal condo policy and the condominium corporation policy?

The condominium corporation where you live, will have its own insurance policy, which is where a portion of your condo fees will go to. This policy will provide you with some coverage, but what most condo owners don’t realize is that they need a policy that specifically covers them.

Condominium corporation will provide what’s called a “standard unit definition.” This definition will be outlined in your condo agreement and outlines what you can change or upgrade in your condo, and what components management is willing to maintain.  It also lists items, areas, and scenarios where the condo corporation’s insurance policy would provide coverage, and where it doesn’t.

2. When does the personal policy come into effect?

It’s generally understood that you require a condo or tenants policy to protect your contents in the home. However, most condo owners are surprised to find out that they share some responsibility for situations and property losses that they hadn’t considered. Some common examples could include:

• Your neighbour’s unit is damaged as a result of flooding or fire from your unit.
• Items have been stolen from common areas like the lobby or exercise room, and they need to be replaced.
• A pipe bursts and the items in your storage locker are destroyed.
• A delivery person is injured in the common area of your condo’s property and files a lawsuit.

Your personal policy could also come into effect if you’ve upgraded or improved your own unit and there was a loss, this type of coverage is called “improvements and betterment’s.” Your condo corporations policy will only cover what was declared in the standard unit definition, so if for example you upgraded the kitchen with new granite counter tops and custom cabinets, that added value will have to be covered under your personal policy.

3. What’s the premium and deductible on the condominium corporation’s policy?

With most insurance policies the higher your deductible the lower your premium will be, and vise versa. In some cases, condo corporations will opt to pay a lower premium and receive a higher deductible so they can save money . What does this mean to you, the condo owner or renter? In the event of an insured peril the condo corporations will pay their portion of the claim, however someone has to pay the deductible (sometimes as high as $25,000). If the condo corporations reserve fund has been exhausted they can seek payment for he deductible from the condo owner(s).

There’s plenty to consider when it comes to making sure you’re properly protected in a condo. But once you’ve made the necessary inquires and consulted with your HMS broker, you’ll be able to enjoy that care-free condo lifestyle. Please don’t hesitate to contact us if you have any questions or concerns about condo insurance.