One question Property Managers are regularly asked is whether a Unit Owner needs condominium insurance. The answer is YES! Both the Condominium Corporation and the Unit Owner should have their own insurance coverage. However each policy covers different items.
Condominium Corporations are required by law to have insurance coverage. The amount of coverage required is determined by having an appraisal done. Basically this is the cost to rebuild the entire high rise or town house complex if it was totally destroyed. All units will be rebuilt to what is called a standard unit.
When an insurance loss occurs in a Condominium unit, without knowing what a standard unit is or without having a Standard Unit By-Law, there are delays in getting the repairs done. This is because Insurance Adjusters, Property Managers, and Unit Owners may disagree over to what level repairs are to be done. A Standard Unit Definition or By-Law makes responsibilities clear. Newer Condominium Corporations have a Standard Unit By-law or a schedule provided by the Declarant under section 43 (5) (h) of the Condominium Act. Some older Condominiums still might not have these documents. Those that do not have one, have a general description of a Standard Unit in “Schedule C” of their Declaration. Some older Corporations have since approved a Standard Unit By-Law to make life easier.
The Standard Unit By-Law spells out in detail what the Condominium Corporation is responsible for in the event repairs are necessary. The Condominium repairs to the Standard Unit By-Law or the schedule referred to above. The Home Owner and their insurance are responsible for any upgrades and improvements. If your standard unit definition calls for carpet and you had an upgrade done with high end hardwood floors, the repair will include carpet. If you have insurance coverage for upgrades, your insurance company will take care of the hardwood.
In the event of damage to your unit your insurance company will ask you for the Declaration, Standard Unit By-Law and Certificate of Insurance for your Condo Corporation. Your Property Manager will be able to help you with these. Know that a standard unit for one Condominium Corporation is not a standard unit for another Condominium Corporation, as each Corporation is different.
Earlier we advised that the insurance policy of the Condominium Corporation and the Unit Owner cover different things. Here are some of the differences and details.
The Condominium Corporation has insurance coverage for:
(a) The property of the Condominium Corporation. This excludes the personal property of unit owners.
(b)Equipment of the Condominium Company i.e. boilers, elevators, HVAC, etc.
(c) Liability against property damage and bodily injury to others.
(d)The units, up to what is called a standard unit. This excludes any upgrades made to the unit by the owner.
(e) Directors and Officers liability coverage.
Homeowners should get coverage for:
(a) Any improvements made to the unit. I.e. a better kitchen with granite counter tops, real hardwood floors instead of lower cost laminates, etc.
(b)Personal property in the Condominium. I.e. clothing, furniture, expensive electronics, jewelry, etc.
(c) Personal liability. I.e. insurance for your personal actions that results in you being liable for damages to people or property.
You should also know that if you caused the damage in your unit or someone else’s unit, you in all likelihood be responsible for the Condominium Corporation’s insurance deductible. A good insurance policy may pay for all or some of your deductible. So shop around!
If you are renting out your unit, you should encourage your tenants to have their own insurance coverage. Their insurance coverage will cover their personal contents as well as liability and third-party deductibles.Depending on what happens, your tenant may be held liable for personal injuries caused to others, as well as property damage to your unit and/or other units.
As an example of how all this works together, we were involved in one incident where a family in a stacked townhouse went out. The toilet overflowed and kept running, flooding their unit and damaging their drywall and hard wood floor. Water also travelled to the unit below and did extensive damage to the ceiling and hardwood floor. When the owners below came home they called the fire department. The fire department went into the unit above and stopped the water flow.
The homeowner of the top unit was responsible for the damage to both units and had to pay the Condominium insurance deductible of $5,000.00. The total repair cost for both units was about $20,000.00. These were standard unit repairs as there were no upgrades in either unit. The Condominium insurance company paid for the repairs.
While the repairs were being done the homeowners spent some days in a hotel. Their insurance companies paid their respective hotel bills. Whatever personal property was damaged in each unit was covered by their respective insurance. It is possible that the insurance company of the unit below went after the insurance company of the unit above to recover some of the money paid out to the owner below.
Insurance coverage and packages vary from broker to broker. You need to shop around using a broker who is familiar with Condominiums and is able to get you the coverage you need. If you don’t currently have a homeowner’s policy for your unit, we strongly recommend you delay no further and obtain one to protect your investment.
This article is courtesy of Irfan Alli, RCM. Irfan is one of Malvern’s valued team members. Thank you Irfan.
