The first condominium insurance policy was written in the 1950s. Today, condominium owners have a lot of options when it comes to their coverage. But before you sign on the dotted line, it’s important to understand what you need and what you don’t. Find out what you need to know about condo insurance.
With the cost of new homes increasing at a rapid rate, condominiums have become an affordable option to break into the housing market. They offer many benefits over traditional home ownership, including lower cost upfront, less expenses and fewer responsibilities. What many consumers are not aware of is that every condominium corporation has different rules for what each unit owner is responsible for.
Condominium Insurance: Condominium Corporation Master Policy
Typically your condominium corporation will have a master insurance policy that covers all the common areas such as the hallways, stairs, pool, gym, parking etc. This policy will also cover the exterior of your unit. However, every policy differs in the extent of the coverage. When you purchase a condo you should check with your corporation for what you are actually purchasing. Reading the agreement will give you a good idea of what you are responsible for, and what the corporation is responsible for with respect to insurance coverage.
The condominium master policy may cover the unit as it was sold, which means the corporation is covering the interior walls, floor, kitchen cupboards etc. Alternatively, it may only cover the exterior walls, which means YOU would be responsible for the interior walls, flooring, cupboards etc. This coverage has to be included under your contents limit. It is very important that you KNOW what you are responsible to insure, so there is not a shortfall on your policy in the event of a claim.
An important distinction between homeowner coverage and condominium coverage is that you must choose the limit of insurance for your condo, including all of your contents. The limit you choose should take into account how much of your condo you are responsible for.
Some additional coverage that many condo policies cover are:
Condominium Unit Owners Coverage
Protects you for damage to your unit (not including your betterments and improvement) in case the policy for the corporation is inadequate or is not in effect. You should check with the corporation each year to make sure the insurance they have is still valid and how much the deductible is on the policy. Insurance has been increasing in recent years so some corporations have had a hard time renewing their policies and decided to increase their deductibles to try to keep the costs down.
Improvements and Betterments
This covers any upgrades made to the unit above how the original unit was sold. (it doesn’t matter if you did the improvements or a prior owner eg., upgrade kitchen cupboards). To determine what is an upgrade vs what is part of the unit you will have to obtain a copy of the condominium master agreement. It should state what is included in the original unit vs what was upgraded over the years.
Unit Additional Protection
Covers if the condominium master policy has a short fall, it will pay to rebuild your unit.
Property Loss Assessments
Covers if the condominium master policy has a short fall and you are assessed to pay for the common areas. With rapidly rising construction costs it is possible your condominium’s master policy may fall a bit short especially if it is near their policy term. Seasonal increases of materials and labor costs can be hard to predict but can significantly affect the rebuilding cost of the building.
Liability Loss Assessment
This covers if the condominium master policy has a short fall from a liability suit, and you are assessed to make up the difference.
It is important that you check with the board to make sure the by-laws haven’t changed and you are now responsible for any portion of the building. We have had a few cases where the unit owners are now responsible for flooring, cabinets even paint on the walls. If this is the case, you should increase your coverage.
Also you should check with your condo board to see what the deductible is for any losses suffered by the condo corporation. The cost of insurance for the condominium corporations has increased drastically over the past few years, and many corporations have increased their deductible in order to reduce insurance costs.
If you are thinking of purchasing a condo or already own one, please contact our office 905-623-4406 to ensure you are properly covered.
Looking to save on condo insurance? Check out our post here on how to save on home insurance