With the plethora of Strata Condominium Units available, and the market for first time owners, buying a condo is often the first step on the Property Ladder. Whether the unit is apartment type, or townhouse type, the owner finds themselves with a building that has insurance with a collectively owned group with other strata owners. While insuring the whole building is a complex matter, insuring the unit for the individual owner can be simple enough, but must dovetail into the strata insurance policy. Your insurance Broker should request to review your building strata insurance policy, to ensure that there are no gaps that may cause you financial loss.
Every insurance policy involves a few basic items, property loss, economic loss, and responsibility loss called Liability. For the unit owner, the following is the base policy, plus some pretty important optional coverages.
Base Policy:
Your base policy will all be included in the base price. Discounts (explained at the end) will only be applied to the base policy, and not the options. Your price may also vary with the location, depending on the aggregate claims history of that postal code area, the type of building, and the floor level.
Contents
This is the total amount to replace everything, brand new for your personal contents, on the premises, including items in the on-site storage locker, and items away on a temporary basis such as luggage while on vacation. This amount will also include the appliances that you buy with the unit. Also include any particular “Improvements and Betterments” such as upgrades that were not included in the original builder’s plan. So, if you have upgraded flooring, countertops, dishwasher, hot tub, etc., be sure to add these as contents. The coverage on the strata building will only replace the building to the original building scope.
Specialty items will be limited to certain amounts, which will vary with the insurance company. These include items like bicycles/e-bikes, collections like sports cards, comics, and wine, high value items like jewelry, furs, and certain business equipment. If you have any value in these items, these can be purchased as options. Check with your Broker for the limits.
Property losses are paid by the insurer if the loss exceeds a threshold, which the unit owner must cover themselves. This is called a Deductible. This prevents small losses from being paid as nuisance claims, which can burden the collective process in unnecessary processing costs.
Better to round up your contents amount, as the cost is small to ensure that you do not run out. Buying less than full replacement may result in a financial loss that will be your burden.
Contingent Unit Coverage
As an extension to the contents amount, the insurer will provide (often at 250% of the contents limit) coverage if the Strata insurance policy is ever short and assesses specific damage to your unit that other unit owners are not assessed. (Such as a tree falling and damaging only your unit).
Contingent Assessment Coverage
Likewise, if the Strata decides that everyone is going to be assessed for insurance related damage, and everyone must contribute for the strata shortage or lack of coverage, then the Assessment Coverage will pay your portion up to your limits. You must have the coverage on your policy in order for this to help you. Earthquake and Water Damage may be covered in a similar manner, with separate deductibles.
Additional Living Expense
If you ever have a property loss where repairs are going to put you out of the unit, this coverage (a percentage of the contents limit) will provide the costs of temporary housing, and certain additional expenses that you would incur.
Third Party Liability
Liability provides legal protection in summary costs up to the Liability limit, plus the cost of legal representation and court costs. This is worldwide coverage, and includes any that you may do or forget to do that causes any loss to others. This does not include specialty losses like auto, aviation, business or professional activities, designed to be covered under specialty policies.
The base policy coverage is usually one million, but most people upgrade to two million for a nominal fee.
Contingent Liability Assessment Coverage
Similar to Contingent Assessment under property, this coverage extends liability if the Strata policy is ever short of funds, and the individual units are collectively assessed this shortage.
Optional Endorsements:
Your broker will recommend and price out the following options. When discussing your situation, your broker may also recommend further coverage, but these are the most common endorsements.
Earthquake
This is excluded under property loss types (perils) and must be purchased separately. Since most condos are built in the earthquake zones in BC, this is highly recommended. A different deductible applies, and you must have this endorsement to make coverage available under the extended Assessment coverages.
This is not expensive for a condo policy, as the price is based on the contents amount you choose.
Extended Contents for Specialty Items
If you have certain items in values excess the base policy, you can extend coverage with a rider or Personal Articles Floater (PAF). For example, many engagement rings these days reach $10,000 or more. Your policy may only include $6000 coverage for jewelry. An appraisal (independent assessment of value) may be required to confirm insured value, plus taxes. PAFs often waive the deductible if the item is lost or damaged.
Water Damage/Sewer Backup/Flood
The base policy only covers the most minimal water damage within the unit. This requires purchase of separate coverage for inside (Sewer Backup) or outside (Flood or Overland Water) water damage. Keep in mind that you need these on your policy, if your Strata building has a claim, and you need to access Additional Living Expenses.
Strata Water/Earthquake Deductible
If you or your tenant are responsible for causing a water loss to the building, the Strata Council has the ability to assess the deductible of the main policy to the unit owner. This may be as small as $25,000, which may be covered by the unit owner’s policy, but may be as large as $200,000, which means your condo policy will not be enough. You may be quoted to increase this on a separate specialty policy to obtain enough coverage.
Similarly, earthquake strata deductible coverage limits may be increased under your unit owner’s policy, as they may be insufficient. To decide this, calculate the deductible from the Strata insurance. Your Broker can assist with this.
Rental Options
If your condo is a rental property, another type of condo policy will be required. If you do not notify your Broker of the difference, then the wrong policy will not help you in case of a loss. If you have the unit occupied by a family member who is not on title to the unit, please discuss this with your Broker.
Home Based Business
Home policies, like a condo owner policy, are priced to be residential policies, and thus, not commercial policies. Small pursuits or business activities at home that are insured on a main policy elsewhere, are usually covered. Self employed activities are not covered for contents or liability losses. Discuss all business activity with your broker. Some activities are allowed, some are able to add to a home-based business rider, some may require a separate commercial policy to be maintained, and some will result in your policy being declined by certain insurance companies. Even if there is no business equipment beyond a basic laptop and printer, Professional Liability for Consultants is very common.
Claims Free Discount Protection
Some companies will provide a low-cost rider that essentially will give you a “free” claim, without a loss of claims free discount. You do have to be insured long enough to qualify for a claims free discount.
Vacancy/Renovations
If your unit is not occupied for any reason, coverage may be restricted or even denied. Discuss these events and your plans with your Broker in order to obtain the insurance company permission, which may result in extended costs.
Discounts:
Age – Depending on the insurance company, mature discounts may start as early as age 45, and higher senior discounts at 60. Your Broker will ask for birthdates to automatically apply this.
Higher Deductible – Most policies have a $500 deductible. Savings can occur if you are willing to take care of higher amounts yourself before claiming, $1000 is most common, and some choose $1500 or $2500. On a condo policy, the savings may not make sense more than $1000.
Security – Owner installed alarms, for fire or burglary may get discounts for the extra care and security against losses. Building alarm systems in strata units are not sufficient.
Loyalty - Staying with the same Broker or insurance company for a number of years can save you money on your policy. If you have an insurance history, consider this before you change brokers or insurers.
Claims Free – After 3 years of having a policy, and not putting in a claim, the insurance company will reward you with a better price. Some will increase that discount after 5 years. By putting in a claim, you will lose that discount until you are again claims free. So, consider this discount dollar amount X3 plus your deductible before putting in an insurance claim. (Saving $100 per year with a $1000 deductible, means that you would not claim for any loss under $1300.)
Credit Check - if you allow the Insurer to do a Soft Credit Check (only shows your Credit Score) you can save on your policy.
Summary
While the above is not an exhaustive list, it will provide coverage tips for 90% of what people are buying. Always discuss your needs and options honestly with your Broker, and answer all of their questions. Buying the wrong coverage may result in a claim being denied. Keep your Broker update with any changes; the policy will increase yearly with inflation-increased contents amount, but as you continually purchase items for your home, consider increasing your contents amount to keep up.
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