Inadequate insurance coverage is an issue that’s on the rise in condos across Ontario! With widespread confusion over limits of the condo corporation’s responsibility versus the responsibilities of the owner and their tenants, many tenants (and even some condo owners) carry insufficient condo insurance or none at all. This leaves all members of the condo community in a dangerously precarious position.
Whether you are buying a condo to live in or purchasing an investment property, the process is both exciting and stressful. On the surface, condo buying seems to be simpler than other real estate transactions, but the fine print in condo by-laws and financial details in the status certificate is often reviewed and accepted without much scrutiny by condo buyers. There is so much to think about, especially for first time buyers, that reviewing insurance coverage and securing an adequate condo insurance policy are often overlooked or trivialized. After all, isn’t that the condo corporation’s worry?
Recent studies show that most Ontario condo owners or purchasers are woefully uninformed about the insurance requirements for condo owners. Most people don’t understand the difference between what’s covered by the condo corporation’s insurance policy and what they are personally responsible for as owners or tenants.
If you are reading this thinking – hey, no worries! I pay more than $500 a month in condo fees and it includes insurance – think again!
Condo corporations are required by law to maintain insurance on the building’s structure and common elements (the lobby, elevators, building equipment, etc). This is the insurance you pay for each month as part of your condo fee. This insurance covers the building itself, but it does not include upgrades made to individual units, nor does it cover their contents. And don’t forget about deductibles!
In BC and Quebec, frequent claims have led to some condo buildings having deductibles as high as $100,000, even for small buildings with only 40 units. Do the math on that, and you could be looking at a special assessment as high as $2,500 every time there is a problem in the building. The problem isn’t as severe in Ontario, as it stands right now the average cost for a one-time deductible for condo buildings in Ontario is $10,000.
As a condo owner, you need to know if your condo corporation has inadequate coverage – whether due to attempts by the condo board to reduce monthly fees by keeping premiums low, a failure by the board to determine accurate replacement costs for their building or frequent damage claims – you are facing substantial financial risk. This is something that all condo owners, those who occupy their units and those who rent their units out, need to be aware of. Remember, if the insurance company isn’t paying for necessary repairs, the owners are.
Obviously, given the above information, it is extremely important for condo owners and investors to understand the condo corporation’s insurance policy, know its limits and all deductibles, and monitor the policy for any changes. However, it is equally necessary for condo owners and landlords to invest in a comprehensive insurance policy to protect their own interests.
Fortunately, condo insurance in general and landlord insurance in specific are usually very affordable monthly expenditures. Landlords usually don’t need to carry much contents insurance, unless they are renting their units fully or partially furnished, additional cost savings.
Landlord insurance is particularly important because:
- It protects any upgrades or improvements made to the unit by you or a previous owner. The insurance carried by the condo corporation only covers the basic fixtures and fittings of a standard unit. Check your corporation by-laws – many include a standard unit definition which can help simplify this process.
- It protects you from liability if a negligent or malicious act leads to injury to your tenant or one of their guests, or causes damage to neighboring units or common areas.
- It protects your property, your appliances or window coverings, and any furniture that you are renting out with your unit.
- It protects your rental income if – as a result of an insured peril – your unit is deemed unlivable and forced to be vacant for an extended amount of time for repairs.
- It protects you from steep condo deductible assessments, property damage assessments, or liability damage assessments.
There’s such a wide range of options on the market and features you can add to your policy, that you are sure to find a policy that meets your needs. Usually costs range from around $15-$35/month on average and can go up from there depending on the size of your condo and the coverage you choose.
Another thing to consider when it comes to insurance is whether you want to include a ‘proof of renter’s insurance’ clause in your lease agreement. And tenants, while this may seem like an unnecessary expense on top of your monthly rent, in reality, this insurance protects your interests more than anything else.
Tenant insurance is quite affordable and usually focuses on 2 main areas – contents insurance and liability insurance. You may not feel that your belongings are worthy of insurance, but imagine having to replace everything all at once. Those costs can really add up! More important than contents insurance, particularly when you are renting a condo, is liability insurance.
Imagine you accidentally start a small fire in your kitchen that gets out of hand. It damages neighboring units or common elements, or worse yet, injures another resident. You are liable for all the damages and injuries sustained as a result of your negligence so it pays to protect yourself with a comprehensive tenant insurance policy.
Helpful tip that can save you money:
At Buttonwood Property Management, we have guided many of our clients through the process of buying insurance. We have been particularly impressed with the professionalism and affordable rates of Square One Insurance as they focus entirely on the home insurance market. If you happen to give Square One Insurance a call, mention that you have been referred by “Sabine El Ghali” and you will receive a $10 discount or a $10 Home Depot gift card.