Oftentimes, we see claims that leave policyholders responsible for thousands of dollars in damages to their units, even when the incidents are not their fault.
Three areas where claims can leave condo owners with a lot to lose:
- Water damage: Water is the leading cause of loss or damage impacting strata and condominium buildings. This is influenced by factors such as aging building systems, more complicated construction, larger buildings, freezing temperatures and severe weather activity.
Water damage caused by routine occurrences – such as burst pipes or overflowing toilets – can easily cause thousands of dollars in damage. In high-rise buildings, the cost can soar from tens to hundreds of thousands of dollars. Driven partly by the increased frequency and severity of water damage losses, strata and condo corporations have seen their insurance deductibles rise. As a result, often there are no recourses available to unit owners through the strata or condo policy when damage occurs in their units.
Furthermore, legislation and bylaws may place responsibility to repair the unit with the unit owner, regardless of how the damage occurs. This is particularly true in British Columbia. The increasing severity of water damage losses also means the repair process is frequently more complicated. Even in cases where the strata or condo insurance policy is involved, the complexity of damage, supply chain challenges and labour shortages may all increase the length of time it takes to ultimately restore the property. This can leave owners displaced from their homes or unable to collect rental income for long periods of time.
- Not enough coverage. Not having enough insurance for your contents, betterments / improvements (upgrades or renovations to your unit since original construction), or rental income also can leave a major gap in coverage in the event of a claim. Understanding how your policy and limits work together with the strata or condo corporation’s coverage is important to a successful claim.
It’s vital to make sure the insurance you purchase provides high enough coverage limits for contents, upgrades and rental income (if applicable) to meet your needs in the event of a total loss. For example, with interest rates and rental prices increasing, is the rental coverage on the policy enough to ensure that rent you would have received is covered for the entire time your unit is unlivable? Do you have enough insurance to cover damage to any improvements and betterments, and are you aware of all the improvements made to the unit over the years?
- Natural disasters. Earthquakes continue to be a looming threat, particularly for policyholders on the West Coast. Reinsurance costs (insurance for insurers) and the concentration of risk are causing carriers to re-evaluate what they are willing to cover. As a result, earthquake deductibles and premiums continue to rise. It is vital that you understand your unit owner coverage, as well as the portion of your strata or condo corporation’s earthquake deductible you may be assessed in the event of one. You’ll want to make sure you can cover that assessment or portion if there is building damage due to an earthquake. For example, if damages to the building are $60 million and the earthquake deductible is 10%, that means unit owners will be responsible for $6 million. If there are 40 units, as a unit owner you would be responsible for 2.5% of that, which is $150,000.
Will I see any changes to my policy?
Insurers always are looking at the frequency and cost of claims, as well as the potential for natural disasters. As a result of repair costs rising, inflation and the increasing number of water damage claims, the cost of insurance itself will continue to face pressure. As more unit owners cover the cost of repairs, personal condominium policies are already becoming more expensive.
Likewise, as the potential for a major earthquake on the West Coast is a matter of when, not if, the earthquake coverage offered by carriers will continue to change.
How is HUB responding, and is there anything policyholders can do?
As a unit owner, there are some things within your control. One of the easiest things you can do is check the water lines in your unit to ensure they are in good condition. Change any bare plastic supply lines to braided steel where possible to increase their durability. You’ll want to check your washing machine, toilets, dishwasher and anywhere else you have water flowing to an appliance. If you’ll be out of town, consider shutting off your water valves. For even greater protection, you also can purchase water leak detectors, sensors and shutoffs at a reasonable price.
Check with your insurance broker to make sure you’re covered should you have to pay for any repairs that fall within your portion of the condo or strata corporation’s deductible for water, earthquake and any other risks. You want to make sure your personal policy and the corporation’s policy work together, and there are no gaps in coverage. Not all policies will have the same coverage and exclusions, so you’ll want to make sure the policies match where it matters.
As our clients’ trusted advisor, HUB brokers start by reviewing the strata or condo corporation’s coverage to ensure that gaps are covered by the unit owner’s policy. We make recommendations to our clients to ensure they have the right coverage and limits. Our advisors are happy to review your policy at any time to make sure you understand your financial exposures and have the right coverage in place, should the unexpected happen.