Often times we hear clients say "I don't need condo insurance, the condo corporation already has insurance" The Condominium Act requires that your condo corporation purchase insurance coverage for the full replacement value of the entire building as originally built, including your unit. The condo corporation's policy does not however provide you with any coverage for the following:
A condo unit owner's policy will provide you with replacement cost coverage for your personal possessions as well as personal liability coverage. In addition your condo policy also fills in some of the gaps that exist in the condominium corporation’s insurance policy. There are many scenarios where the condominium corporation’s insurance could be inadequate. The following coverage is included on a condominium policy to handle these possible scenarios.
It is possible that the insurance arranged by the corporation is not adequate, particularly as building costs have increased so quickly. If there is an error, the corporation’s policy might not be in effect at all or might not cover a certain cause of loss. In that situation, your unit owner policy would pay the extra cost to rebuild your unit under “Contingent Coverage or Additional Unit Protection” That way, your investment is protected even if the corporation’s insurance is lacking. The limit of insurance should be high enough to cover the replacement value of your unit.
The condo corporation insures the common property, but if that insurance coverage is not enough or if the claim is not paid for some reason, they have the ability to charge, or assess, a portion of any insured damage to each unit owner. The property loss assessment coverage on your personal condominium policy will pay your portion of any insured damages assessed to you. The limit of insurance should be high enough to cover this possibility.
It is possible that the corporation’s liability coverage may not be enough to pay a large lawsuit, either because the limit on the corporation’s liability policy is not high enough or because they are very unlucky and have several claims in one year. In that situation, the individual owners will be expected to pay their portion of the shortfall, just like in a property loss assessment. The liability loss assessment coverage on your personal policy will pay your share of a liability loss that is charged to you as an owner.
Damage to your unit, other than improvements you made, is normally covered by the corporation policy. That policy will have a deductible. Many condo corporations have high deductibles to save premiums. If there is damage that is caused by you (or your tenant, if your unit is rented), the Condo by-laws may state that the building deductible can be charged to you. For example, if you leave a pot on the stove and it causes smoke damage to the condo, or if you leave a window open and pipes freeze, there could be substantial damage. If you have damage to your contents at the same time, you could be paying the deductible on your own policy plus the deductible for the building claim. $25,000 deductibles are becoming standard on condo corporation’s insurance policies. Your personal condominium insurance policy will pay the building deductible as part of your claim.
The condo corporation’s policy will insure the building including your unit but may not pay for any improvements or betterments that you or a previous owner has made to your unit. If the standard unit was built with carpet and arborite counter tops and they were upgraded to hardwood and granite, that increased cost will be covered on your own condo insurance policy.
Contact us today for more information about Condo insurance.