In most cases, the condominium corporation insures the building in which your unit is found. (So-called “bare land” or “vacant land” condominiums, which are really detached homes for which you are entirely responsible, but are built on commonly owned land and may have shared amenities, are insured differently; they can be insured the same as traditional condominium corporations but may also be insured as separate structures by each owner. The condo corporation makes a decision on this based on its wishes and provincial law.) Because typical condominium corporations insure the building, unit owners don’t have to – with a few exceptions as follows.

Any improvements or betterments – changes made to the unit since construction by you or previous owners, such as a finished basement, upgraded floorings, a higher quality kitchen, built-in bookshelves, and so on – are insured by you under your unit owner’s policy. (In some areas, like southern Alberta, it is common for the condo corporation to insure them for you, so you should check with your board or property manager to see how it works at your complex.)

If the condo corporation has a loss to common property and turns out to be uninsured or inadequately insured, the condo corporation can levy a special assessment against you to have you pay your share. If your policy is broad enough to cover such damage, and you have special assessment coverage, you can claim this against your own policy. There is also coverage for similar liability situations, for example an underinsured legal liability claim against the condominium corporation due to bodily injury or property damage.

Similarly, if there is damage to your unit but the condo corporation’s policy is not broad enough to cover the damage, or is underinsured, your loss will be assessed against you as unit owner. Most unit owner policies have contingent coverage to kick in under these circumstances. They are most commonly of use when losses may be excluded by the condo corporation’s policy (for example, accidental flooring damage) when you have purchased a broad enough policy to cover such damage.

One other issue that is easily overlooked is the issue of deductibles. The deductible is the portion of a loss you, as an insured person, must absorb before the insurance coverage begins to pay. For example, if you have a five hundred dollar deductible on your unit owner’s policy, and you have a burglary, the first five hundred dollars of the loss is paid by you; your insurer begins to pay after that point. What happens, however, with the condominium corporation’s deductible? It will have its own, and while in smaller complexes the deductible might also be as low as five hundred dollars, in some larger ones such as those found in the Harbourfront region of downtown Toronto, deductibles of twenty-five thousand or fifty thousand dollars and even higher are possible. In some cases, you may have to pay that deductible in addition to your own.

Provincial condominium legislation, which is different in every province, sets out whether condo corporations can require unit owners to pay the corporation deductible. In many provinces, corporations can pass a by-law, rule or declaration that requires you to pay that deductible if damage originated in your unit or was your responsibility. This does not necessarily mean the damage must be your fault. Other provinces, however, do not permit this to occur.

If you live in an area where deductibles can be charged to unit owners, and your condo corporation has taken the necessary steps to use this right, find out what that deductible is, and buy a unit owner’s policy that has some sort of deductible buydown feature. Usually this coverage is provided as part of the contingent coverage section (and sometimes it is a separate section of its own). Some insurance companies charge to add this coverage; some include it automatically but with an upper limit (say a thousand or 2,500 dollars), and some include it without limit. If your condo corporation has a high deductible, you will want to ensure that you buy insurance that has sufficient coverage for it.

What about legal liability? What happens if you accidentally start a fire to the building and damage several units? As mentioned earlier, if you were negligent you would be found responsible for the damage caused to fellow unit owners’ personal property, and you may be responsible for the complex’s deductible, but underneath most provinces’ condominium legislation, you generally cannot be sued for damage to the building and common elements. (Some exceptions exist, such as arson, but are generally not covered by condo owner liability insurance.)

Don’t forget to give some thought to the source of your insurance. Does your broker or agent (or do the call centre staff, if you use an insurer that provides coverage over the telephone) understand the intricacies of condominium insurance? Ask how deductible buydown works, or how improvements and betterments are insured. If the person does not know, ask if someone else might understand condominiums better, or consider a different source for your insurance.

Some people feel that you should buy insurance from the same insurer that insures your condo corporation. The idea is that adjusting losses is easier because the boundary between the policies is less important; the same insurer is paying anyway. I am not so fond of the idea – the insurer that might be perfect for your hundred unit apartment building might not be the same one that is perfect for your valuable collection of fountain pens.

Finally, be sure that you have a copy of the by-laws, rules or declaration of your complex so that you know your obligations and responsibilities. Some of the clauses will pertain to insurance and give you some direction as to how to proceed.

Don’t fear condo unit insurance! Find yourself a good insurance professional, become a knowledgeable buyer, and get a policy that suits your situation.

Jim MacKenzie, MBA, Dip.B.A., FCIP (Hons) is an insurance broker at Dusyk & Barlow Insurance in Regina, Saskatchewan. He is national Vice-President and President-Elect of the Canadian Condominium Institute and President of the South Saskatchewan Chapter of the Institute. He is also a lecturer in management communication and personal finance at the Paul J. Hill School of Business at the University of Regina.

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