Condo insurance

A lot of condo owners have a misconception of what condo insurance is, and the type of personal coverage they need.

Before I elaborate on this, I would like to do a brief clarification on semantics. Depending on where you live, the “condominium world” has different names. In British Columbia, where I live, it is called Strata. This is the term I will use.

When you buy a condo, you become a member of the strata corporation. You own a share of the building and are entitled to vote on its affairs.  One of your responsibilities as an owner is to pay monthly fees.

These fees usually cover for all repairs and maintenance, electricity, landscaping, caretaking and insurance. In British Columbia, insurance is mandatory for strata corporations. Owners are automatically named as insured.

However, the strata insurance does not provide coverage for anything and everything. The policy usually covers the original structure of the building and its original fixtures. It also covers for the replacement of the building at cost. If your building burns down, the insurance will pay for this. Note that if you have a mortgage, the money will be sent to your lender first.

The policy will also have a deductible. To keep costs low, most corporations choose a higher deductible. My strata’s is at $ 10 000. In order to trigger a claim, the total cost of repairs needs to exceed this amount. The corporation may also elect not to file a claim, particularly if an owner is responsible for the damage. Filing repeat claims has an impact on the price at renewal.

As an owner, you need to have coverage for both property damage and deductible assessments. You also need to include your personal belongings. The strata insurance will definitely not pay for them.

As mentioned above, the strata insurance only covers for original fixtures. If you change the floorings, the kitchen cabinets or the blinds, these are no longer covered. You need to include the value under improvements on your policy.

I would suggest you also include additional living expenses. If your condo sustains massive damage, it might become uninhabitable.  The Province of British Columbia will only pay for relocation for 3 nights.

Obviously, your personal insurance could include many more items, but these are the basics. As a council member of my strata, I sometime encounter disgruntled owners who don’t understand why they have to file a claim with their own insurance company, or why they actually need personal coverage.

They are under the assumption that because they pay monthly fees and the building has insurance, they are not responsible for anything else. It is not the mandate of a strata corporation to pay for and be responsible for anything that happens in a building.

Thoughts and tips on home insurance

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Recently, I received an updated insurance policy for my condo. I took the time to review it carefully and noticed a mistake in my initial application summary. It stated my condo does not have laminate or hardwood floors, when it actually has.

I called my insurer to have this corrected and decided to ask additional questions about my coverage and to clarify some terms I didn’t understand. I am glad I did! I suddenly realized that I had been blissfully ignorant since I moved in a year ago. Luckily, nothing happened during that time or I would have been in for a nasty financial surprise.

Like the majority of people, I assumed I was covered for some items and not for others….I was wrong on all points! For example, I wasn’t sure if I had coverage for sewage back-up. It turned out I had. I also thought I would be covered in case of flood when there were actually lots of exclusions to this in my policy.

But the biggest shock was when my insurer told me my coverage was only $ 2 500 in case of damage caused by me to another unit or to common property in my building. As a condo owner, my strata provides additional insurance, however their standard deductible is $ 10 000. If there had been any claim, I would have been on the hook for a minimum of $ 7 500!

Here are a few tips to avoid being left high and dry by your insurance company:

–          Don’t assume that because you pay premiums, you are covered for everything and anything. Read your policy thoroughly and call your insurer if you don’t understand terms or clauses. There are usually lots of exclusions when it comes to flood, sewage back-up or earthquake. You need to know what you are covered for and for how much.

–          Know what your deductibles are. A deductible is a specified amount of money that you must pay before the insurance money kicks-in. Choose an amount you are comfortable with and able to take on. The lower your deductible is, the higher your premium will be. Better safe than sorry, I say!

–          Declare any change in your situation. You started a home-based business? You rent out a portion of your property? You had a baby? Declare it! Not doing so could result in your claim being denied and/or your coverage being cancelled.

–          Check your initial application summary and correct any mistake. Your initial application is the basis for underwriting your policy. When you file a claim, your insurer will compare it against your initial application to see if you have misrepresented yourself or lied.

–          Periodically review your policy. If you did substantial renovations in your home, you need to increase your home improvements coverage, and so on. Your policy needs to reflect your current situation.

But, most importantly, remember that insurance companies are businesses, not charities. The fewer claims they pay, the higher their profits. If your insurance provider has any opportunity to deny your claim, it will do so. Sadly said, but it is the -harsh- truth.