NOTE: This post is not a substitute for professional insurance or legal advice with regards to insurance polices and claims. Talk to the appropriate professional about your specific scenario and requirements.
One detail that is required but often overlooked is the importance of Owners having their own personal insurance policy. Of course, this is important for detached houses when you’re the sole owner, but is very important for Strata Owners to have a personal insurance policy in addition to the Strata insurance policy considering the changes to the Insurance Market across BC.
In 2019, Strata buildings started to see increased insurance deductibles for damage (for example, deductibles were commonly $10,000 before and now they’re often $100,000 or more), increased insurance costs overall, lack of 100% coverage and delayed approvals. The cost to repair any damages to your unit, other units and the building are far higher due to these insurance changes. Below is some information to know.
Say the deductible for water damage on the Strata’s insurance policy is $100,000 – you could be responsible for this amount if you cause a water damage issue or if the water damage issue originated in your unit. To protect your personal liability against claims or the risk of a deductible, it is vital that you purchase a personal insurance policy to cover the strata deductibles and the cost of any damage you may or may not have caused.
In a Strata, who pays the costs with regards to an insurance claim depends on the level of damage, the Strata insurance policy and your personal policy. Here’s a helpful CHOA Article: Who Pays the Insurance Deductible and a follow up on this article, Clarification on Insurance Deductibles.
CHOA is the Condo Home Owners Association of BC, providing advice and resources to Strata’s and Strata Owners in BC. For more information: https://www.choa.bc.ca/. There are plenty more helpful articles to find in their “Resources” section.
Long story short, if you cause damage – and whether that is something you have done directly by leaving the bathtub running or a pipe/appliance in your unit bursting unexpectedly – you are responsible for the cost. If the cost of the damage is below the Strata water damage deductible, then you have to pay the cost of repairs, and any damage to your neighbours units may be your cost to repair as well. Your personal insurance policy should cover you for this amount. If the cost of the damage is above the Strata water damage deductible, then the Strata will pay the deductible (the cost will come out of the Contingency Fund, Operating Fund or may require a special levy from Owners) but the Strata can require that you reimburse them for the cost. Your personal insurance policy should cover you for this amount. If the issue was caused by the Strata (say a common pipe in the hallway explodes and damages your unit) then the repairs will be covered by the Strata, expect for any upgrades done in your unit. The Strata Insurance Policy will only cover the cost to replace original finishings, so if you replaced carpet with expensive hardwood, your insurance policy should cover you for the extra costs of your upgrades. The Strata Insurance Policy will likely not cover your costs to be relocated to a different unit during repairs, but your insurance policy should cover you for the cost of temporary relocation. Your personal insurance policy should also cover your for your personal belongings, liability in accidents, and more.
Insurance Policies are bland, yet complicated, with plenty of fine print that can really affect the use of your policy, so make sure you speak with an insurance advisor to understand the ins and outs of your policy and what would happen when there is significant damage.
Do your Due Diligence before Purchasing
Before purchasing your condo, get the Strata insurance summary from the Seller (who will get it from the property management company) and talk to a professional insurance agent. Send them a copy of the Strata Insurance Policy so they can help you understand the deductibles, how they are best covered, the extra coverage you may want and what it will cost you.
It is also valuable to review the date the policy will be renewed. If it’s in the next month or two, you may want to wait to find out what the new policy will be before making your purchase official as there could be some significant increases or changes to the policy.
Mortgage Lenders will require that the Strata has an active insurance policy and that you have a personal insurance policy in place before funding the mortgage on the Completion Date, so do your research prior to removing subjects to ensure you understand your options and the costs involved.