Condo Insurance Coverage Explained

Condo Insurance Coverage Explained - Larlyn Property Management

What is Condo Insurance?

Condo insurance is a type of home insurance undertaken by the condo corporation to protect a condo property. It provides coverage for the shared assets of a condo corporation (which is made up of all unit owners) in the event of loss or damage to the property. It is one of the most significant expenses that a condo corporation is responsible for, since all common areas and fixtures need to be covered by the insurance policy (for instance, the boiler is a common fixture that all owners use, and as such, repairs or replacements should be covered by the insurance policy).

Condo insurance can also refer to the separate policy of an individual unit owner, intended to protect personal belongings and for any improvements made to an individual unit in the event of damage or destruction.

What Should Be Included in a Standard Condo Insurance Policy?

When shopping for condo insurance, condo corporations should ensure that several key items are covered.

For the building itself, fixed structures on the premises, any permanent fittings or fixtures, additions or extensions to the building, and maintenance materials or equipment on the premises for routine repairs should all be covered. Any decorative plants grown inside the building should also be covered.

Any collective amenity—such as boilers, air conditioning equipment, and common electrical elements—should be insured under the corporation’s policy.

It’s important that the policy also covers commercial general liability, which protects the corporation in the event of lawsuits for accidents (slip and fall on the premises, for example) or damage to someone else’s property.

Past and present board members should be insured against claims made against them as a result of their service on the condo’s board of directors.

How is a Condo Appraised for Insurance?

An appraisal for a condo building is completed by a professional appraiser or other recognized industry professional. It’s the duty of a corporation to make sure that the condo building is insured for full replacement value. That means that in the event of a total loss, the policy should cover the cost of rebuilding, which can be considerably more than an appraisal estimate due to a variety of unexpected costs.

Guaranteed replacement cost

Guaranteed replacement cost (GRC) remedies this problem by guaranteeing the full replacement cost of the property as long as you have an insurance appraisal that’s current within the last 36 months, and the property is insured to the full appraised value. With guaranteed replacement cost in your policy, it doesn’t matter if the cost of rebuilding exceeds the value of your appraisal; your costs will be fully covered.

What Happens in the Event of a Loss?

In the event of a loss, immediate action should be taken to mitigate further loss or injury (water is turned off, fire alarm is pulled, emergency services are called, etc.). The unit owner contacts the property manager and their personal insurance broker. Property managers contact the corporation’s insurance company, then contact contractors or service providers, and emergency maintenance is performed.

Insurance adjusters will be assigned to process the claim. They will work with the property manager, unit owners, and the insurance company to determine what work needs to be completed, and what deductible applies in this case.

Once the work is approved, contractors perform any additional restoration work, and the insurance adjuster calculates the loss and submits the cost to the insurance company for payout.

Any deductibles are the responsibility of the condo corporation, and for any subsequent assessment to owners whose units have been damaged by the loss.

What’s Typically Included and Excluded

A condo corporation in Ontario is required to insure a property against typical perils, including:

  • Fire
  • Flood
  • Wind
  • Earthquakes
  • Lightning
  • Smoke
  • Vandalism
  • Explosion
  • Water escape
  • Strikes and riots
  • Impact by vehicles

They do not cover expected wear and tear, rust or corrosion, pollution damage, mould, or asbestos. They also won’t usually cover unexpected events like war or terrorism. Repair and maintenance are always the corporation’s responsibility and should be outlined appropriately in the corporation’s budget. These costs are not insurable.

Ensure Your Property is Protected with Larlyn Property Management

At Larlyn, we’re the experts in condo property management. We’ve spent decades building a reputation for customer service through cultivating close working relationships with our clients. We help condo corporations make the tough decisions to protect your property investment, and we embrace innovative solutions to age-old problems. We offer comprehensive administrative services, financial management, and project management to help you make the best decisions on behalf of your unit owners. Contact us today and share your story with us so that we can craft a customized proposal to address your unique needs!