What Condo Insurance Coverage Do You Need?

If you own a condo unit the insurance coverage you require is very different than a homeowners insurance policy. There are several factors that you need to consider when finding the best condo insurance coverage for your unit. Let’s explore the different coverage options you may need and highlight some key coverages to ensure you are not on the hook if a claim occurs.

What is Condo Insurance?

To begin, let’s clarify what condo insurance is. You could own a townhome in a complex or a unit in a high-rise condominium. Either way, your condo insurance coverage protects you and your contents within the walls of your unit. You, as the condo unit owner, do not own the building, and so your insurance coverage is different than that of a homeowner. If you are just renting a condo unit, you do not require condo insurance, instead you need a tenants insurance policy.

Your condo insurance covers your personal contents, any betterments or improvements made to your unit, additional living expense and your personal liability.

What Condo Insurance Coverage Do You Need?

There are several unique coverages to a condo insurance policy that you need to understand in order to have adequate coverage should something happen to your unit. Below we explore the different coverages you will have on your policy and what they mean.

Personal Contents Coverage

The contents in your condo unit include anything from furniture and appliances, to electronics, clothing, jewelry, etc. Unlike a homeowners policy where a percentage of the building value is assumed for your contents amount, for a condo policy you need to select your own contents coverage amount. If you are unsure of an appropriate amount to insure your contents for, ask your broker, they can help determine a reasonable value for your contents. Most companies requires a base amount of $30,000 in contents coverage. If you have certain items that are considered high value including jewelry, art, bicycles or any collections be sure to advise your broker as additional coverage may be required to insure those items to their full amount.

Betterments and Improvements Coverage

This coverage can be a little tricky, and may require some dialogue with your condominium corporation. Any upgrades to your unit, from when it was originally built, need to be included on your insurance policy as betterments and improvements. If you are the first owner of a new condo building, this coverage may not be necessary for you, as the unit would not have had any upgrades unless you do them yourself (at which point you’ll need to add this coverage). However, if you are purchasing a condo unit from a previous owner it is important to have dialogue with them to find out if any renovations were done and to what value. The reason this is so important is if there is a claim for your unit and you do not have betterments and improvements coverage, the unit will be repaired back to the original unit. This means any upgraded flooring, countertops, cabinetry, etc. will not be covered to the upgraded amount. If you want to be sure you have adequate betterments and improvement coverage on your policy speak to your property manager or condominium corporation to find out what the original unit had as far as flooring, countertops, etc. and then assess the improvements your unit has from the original version.

Additional Living Expense

If a claim occurs in your unit and you are unable to inhabit it while it is being repaired you can use your additional living expense coverage. This is typically a monetary amount of coverage on a policy that can be used to rent or live elsewhere while your unit is being repaired. Be cognisant of where you select to live as once the coverage amount is up, you would be responsible to pay anything beyond that amount while your unit is still being repaired. Ask the insurance company or adjuster for a timeline on the repair and always air on the side of caution. If they tell you it will take 2 weeks to repair, budget for 3 just to be safe. That might mean instead of staying in the Ritz Carlton you choose the Best Western to ensure your coverage is adequate.

Sewer Backup and Overland Water Damage

Water protection is optional on a condo policy. However, it is still a very important coverage to consider. If you live on the 10th floor of the condo you may think there coverages are not necessary. But

Personal Liability

Your personal liability covers you against bodily injury or property damage that you or a family cause to a third party. This is a standard coverage for all property insurance policies and is not unique to condo insurance. In today’s society we recommend carrying at least $2,000,000 in personal liability. Lawsuits are becoming bigger and bigger and ensuring you are protected is our job. If you feel like you need more liability coverage you can also purchase an umbrella insurance policy to provide additional coverage.

What is a Condominium Corporation Deductible?

Now we get to the most confusing portion of a condo insurance policy – condominium corporation deductible. Now, not only do you need to carefully examine your own condo insurance policy, you also need to see what the condominium corporation policy has for certain limits and deductibles. Overlooking this coverage can be costly for a condo unit owner. When purchasing a condo unit you need to request from the condo corporation to see what their deductible is. Condo corporations have their own insurance policies and one way they try to lower their premium is by increasing their deductible. Why does this matter to you, it is not your policy? If a condo corporation has a potential claim that is less than their deductible they will split that cost among all affected condo unit owners.

Claims Example 1: For instance, lets say the condominium corporation has a deductible of $100,000 on their policy. Now one of the common areas (say a workout facility) that is shared amongst unit owners is damaged but the damage is only $80,000 ($20,000 less than their deductible). All the affected unit owners (say there are 5 in the entire condo) will be on the hook to cover the damages, in this case $16,000 per unit owner. If your condominium corporation deductible coverage is only $10,000 you would be on the hook to pay the remaining balance.

Claims Example 2: Another example is say you own a unit on the ground floor of the condo. The unit above you has a pipe burst. Your unit and the unit above you are the only ones affected. The damage is $40,000 and the condominium corporation has a deductible of $50,000. Your policy now needs to respond and because there are only two affected units your will need to split the $40,000. This time you confirmed with your condo corporation what their deductible was and you purchased the additional coverage to match their deductible amount of $50,000. Unfortunately the other affected unit did not. Your policy will cover the full amount you owe (in this case $20,000) however, your neighbour only has $10,000 in condominium corporation deductible coverage and now they have to pay the additional $10,000 out of pocket.