Much is said about a house being the biggest investment you can make, but that isn’t fair to the many people that prefer the maintenance-free lifestyle of a condo. Some people want home ownership, just not a single-family home – and that is okay! In addition to the manageable square footage, it’s great to not have to worry about re-shingling a roof or upgrading the heating system. That’s the job of the condo corporation. However, just because it’s a condo doesn’t mean you should forgo insurance. In fact, with some condos being priced at $700,000+ in Toronto and Vancouver, condo insurance should be top of mind! Today we will look at four types of insurance to protect your condo.
1. Title Insurance
Title insurance is a coverage that protects you against potential issues and fraud associated with the title of the property, in this case the condo that you are buying. It is a one-time cost and in Ontario is around $250.
It covers such risks as unknown liens on your property, title fraud, title forgery, zoning issues and a few similar items. The chances are, once you are through the legal step of the purchase and you got this insurance, you will never hear about it again. So, why have it? It can be difficult to tell if there are issues that will arise against your property but if they do, they are guaranteed to be costly. Anything dealing with zoning, liens or fraud is a lengthy legal battle and legal battles cost money. The insurance is great protection and well worth the peace of mind.
2. Mortgage Insurance
Mortgage insurance can be a tricky area. It is offered by banks when you obtain a mortgage, but there can be a few drawbacks. Bank mortgage insurance is not portable. That means, if you renew your mortgage elsewhere, you need a new insurance policy too. Also, most insurance products from banks pay the bank, not you. Many bank mortgage products also don’t decrease the premium as your loan is paid down. On the other hand, if you have a large enough personal life insurance policy, the proceeds could be used to pay off the mortgage and still have some left over for your beneficiaries.
Life insurance that can be used for this purpose include:
- Term life insurance: premium covers a set number of years
- Whole life insurance: the premium covers you for life and there is a cash savings account attached with guaranteed interest. You can take a loan against the amount.
- Universal life insurance: the premium covers you for life and there is a cash savings account with non-guaranteed interest. You can withdraw or take a loan from the amount.
- No medical life insurance: available without a medical exam. This is a good option for those whose health would get them a rating or denial. It is also a good option for faster application processing or if you simply don’t like visiting the doctor.
3. Condo Owner Insurance
Too many condo owners make the mistake of not getting their own home insurance policy because they believe everything is covered by the condominium corporation. This is not correct. The corporation’s coverage is only for the building envelope and common areas. Individual condo insurance protects the following:
- Condo upgrades: Things like upgrading to hardwood floors, installing crown moulding, kitchen renovations, etc. Coverage extends to upgrades made by previous owners.
- Unit contents: are covered up to the standard limit (usually around $20,000 but you can change this if you need a higher or lower amount). Contents includes your furniture, goods, clothing, electronics and (if you have one on site as part of your condo ownership) items in your storage locker.
- Third party liability: provides coverage of typically between $500,000 and $3,000,000 in case you inflict damage on another person in your unit or to another unit in the condo building. For example, someone falls in your kitchen or is bitten by your dog, or you leave the tub running and flood the unit below yours.
- Theft from your condo unit: is covered by individual insurance. The risk of theft such as B&E is not high due to condo security protocols, but there is still a risk from people inside the building or even less-than-honest people you know and unwittingly let into your unit.
- Locker contents: as mentioned above with “theft,” your locker (if it is on the premises and/or is part of your condo agreement) is covered. Don’t forget to tell your insurer you have a locker, if applicable.
- Special insurance assessments: There are times when a condominium corporation’s coverage does not cover all the damages. For example, there is roof damage and not enough money in the reserve fund, or if a single unit owner is responsible for a great deal of damage (like causing a fire). Assessments are very expensive, costing condo owners $25,000 or more. Have special assessment insurance to protect yourself against this big risk.
- Additional living expenses: are important because there are times you may not be able to live in your condo if it is undergoing insured repairs. This coverage helps you with the cost of a hotel or other temporary accommodations. Limits of coverage typically start at $10,000.
If you are interested in getting condo insurance in Canada, check out the links below:
4. Condo Corporation Insurance
The condominium corporation’s insurance protects the building envelope (structure), common areas (hallways, foyer, pool, gym, elevators, etc.) and hazards from falling glass.
In British Columbia, where condominium is typically called strata, condo corporate insurance is often called strata corporate insurance. It is important to mention that this insurance IS NOT OWNED or HAS TO BE PURCHASED by you. It is owned by your condo corporation. A current policy of condominium corporate insurance can be typically found in a condo status certificate, a set of documents you get when buying a property.
It is important to pay attention to coverage limits in this policy but also to the size of the deductible. Based on the current regulations, condo corporations can pass their deductibles back to the unit owners, resulting often in thousands of dollars of additional payments. In Alberta the cap on condo deductibles that can be passed back to unit owners is $50,000.
It is worth mentioning that though your condo corporation buys the condo corporation policy and pays for it, in fact it is covered through your condo fees. Any significant increases in condo corporation insurance will inevitably result in increasing condo fees for many unit owners, especially in Alberta and British Columbia.
It is important to mention that if you are renting out your condo, there is another insurance type that comes into play: tenant insurance.
5. Condo Tenant Insurance
If you rent a condo, be sure to have your own condo tenant’s insurance. Your landlord is not responsible for your personal liability nor your belongings (contents). Without insurance, you could face steep financial trouble if someone is injured in the unit, you damage another unit, or your belongings are damaged or stolen.
As a landlord renting out a condo unit, mandate that your tenants have their own tenant insurance policy. As the landlord it is well within your rights to make this stipulation. Make it part of the rental agreement or lease.
We hope that this article provided some clarity about various insurance pieces associated with insurance.