Do I really need condominium insurance?
If you’re a condo owner you may think you don’t need condominium insurance coverage, but it's actually quite important. A common belief is that you’re covered by the common expense fees that you pay every month, when that simply isn’t the case in most instances. A study by Allstate found that 61 percent of purchasers of new condos weren’t aware that they could be held personally responsible if a fire or leaky pipe in their unit damages their neighbour’s. Most believed it was covered by their condo insurance policy.
Condo corporations are required to insure the building and its common areas (the elevators, gym, lobby, etc.), but not everything is covered, and even if it is, you may have to pay a deductible. This will come as a rude awakening to a lot of condo owners. As you may already know, the typical condominium insurance coverage only protects the common areas, but does not coverage your personal belongings. It also doesn’t cover any improvements you make to your units. Furthermore, it doesn’t cover any damage to your unit or provided liability insurance if someone gets hurt while visiting your place.
Typical upgrades to a condo include hardwood floors, granite countertops and new appliances. The good news is that if you want to protect these upgrades, you can purchase condominium insurance coverage to protect yourself during the upgrades.
Since most condos come with storage lockers, you’ll also want to know if your insurance policy coverages any items you decide to keep in the locker for safekeeping. You’d hate it if there was a flood and all your personal belongs were ruined, and to top that all off, you weren’t protected under your condominium insurance coverage. If your locker is considered a separate unit (ask your real estate lawyer if you’re unsure), it’s your responsibility to let your insurance company know, otherwise you might not be covered.
Special Assessments
Besides condo associate fees going up, one of the biggest financial worries of condo owners is the dreaded special assessment fee. A special assessment could be levied if, for example, there is damage to the common element or if the condo corporation is sued and the reserve funds are insufficient to cover the loss. You can actually purchase condominium insurance coverage to protect yourself against claims through special assessments.
The bottom line is, next time you’re thinking of purchasing a condo, take the time to do your research. Speak to building management and the insurance company that covers the building. Make sure you know exactly what is and isn’t covered in your policy and the deductible. That way you aren’t leaving yourself personally liable and there won’t be any surprises in the form of a special assessment down the road.