Why do I need Condominium (Condo) Insurance

A survey by the Insurance Bureau of Canada showed that many condo owners have no idea what type of insurance they need or have, so here are some answers:

Why do I need my own insurance if the Condo Corp already has a policy?

Both the unit owner and the Condo Corporation need their own insurance policy.  The Condo Corp’s policy covers the common areas of the condo and the building up to the point of the “Standard Unit”.  The unit own’s policy covers everything inside the “standard unit”. 

What’s the “standard unit”?

The standard unit is defined in the condo corporation’s bylaws.  Most people never read their condo’s bylaws, so its not uncommon for you not to know.  It can be different for every condominium but typically, the standard unit only includes the shell of the inside of the unit.  Everything that is added afterwards to finish the unit, such as the drywall, flooring, kitchen cabinets, bathroom fixtures is not included so they are the responsibility of the unit owner.  Any upgrades added to the unit after its built are never part of the standard unit so they are always the responsibility of the unit owner to insure.

What can happen, I’m in a concrete box in the sky?

Actually, lots.

• If you’re cooking and some grease catches fire, you could be looking at extensive repairs to your unit.  Not only will the fire damage the unit but the smoke from the fire will permeate everything in the unit.  Having everything cleaned to remove that smell can big bucks. Things will be made worse if the fire department comes to put out the fire.  They will put out the fire with high pressure hoses and the smoke soot mixed with the water will essentially ruin everything in the unit.
• If the hose supplying water to your toilet or washing machine breaks while you’re away at work, it will not only flood your unit, the water will also flood many of the units directly below you. You then have to pay to repair  the flood damage to your unit AND you are responsible for all the damage caused to the units below.
• Lets say it’s the toilet supply line of the unit owner above you that breaks.  Your unit could be flooded causing thousands of dollars of damage to your stuff.  They’re responsible, but what happens if they have no insurance?  If you have insurance, your company will pay for all your damages and they will go after the other guy. If you don’t, you’re going to have to sue them yourself and it could take months or years to see any money. But that doesn’t guaranteed you’re going to get paid since they may not have the money to pay you.
• Maybe you have some friends over and serve some “adult beverages”.  Someone slips on some water spilt on the floor and seriously injures themselves. You could be sued for their pain & suffering, lost wages while they can’t work.  pain & suffering, lost wages while they can’t work and much more.  If they drive home and accidentally injure someone, you could be held liable for that person’s injuries.
• Like we said, the condo corp has insurance to cover the building and common areas.  However, condo insurance has become very expensive. To save money, your board of directors, may choose to take a very high deductible to save money (or if your condo has had a number insurance claims, the insurance company may have forced a high deductible on them).  If the condo has a couple of claims, paying that deductible may drain your condo’s reserve fund.  Well, guess what?  You and the other unit owners ARE the condo corporation.  If the reserve fund has to be replenished because of the payments of these large deductibles, every unit owner could get a special assessment to do it. And, it could be thousands of dollars.

All of the above scenarios should be covered under most good condo insurance policies.  How much does condominium insurance cost?  It depends on the type of condo you are in, where its located and how much stuff you own.  But a typical condo insurance policy costs around $200-300 per year.  For around $20-25 per month, you can be sure you’re protected from potentially a significance financial loss.

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