We have noticed a couple stories in the news lately regarding condo buildings having trouble finding insurance in Alberta lately. This is troubling for individual owners, even though condo building insurance is different from personal condo unit insurance.
Provincial law stipulates that condo boards must carry insurance on common property. Owners then cover the cost of these policies through their monthly condo fees. A condo building policy should cover areas such as hallways, roofs and building envelopes against loss resulting from destruction or damage caused by fire, lightning, windstorms, hail, explosions, water damage, and other named perils. For example, condo building insurance usually protects against such incidences as water damage because of a leaky roof, or damage from a fire that started in common area walls due to faulty wiring and then spreads to individual units. There must also be a liability component to help protect against actions or lack of appropriate actions by the building managers causing property damage, injury, illness, death, or other losses.
The legislation also requires that condo building insurance policies be for replacement cost only, not actual cash value (ACV). Replacement cost differs from ACV in that it reflects the amount of money that would have to be spent to repair damage back to the same sort of condition as it was.
Your personal condo insurance policy will cover you for your personal property inside your condo and your storage locker. You may also include coverage against water damage, which we highly recommend, as well as coverage against insurance-related special assessments (more on this later). Additional living expense insurance may also be an option, which will provide funds to assist with housing expenses should you be unable to occupy your unit due to repairs being carried out because of an insured loss.
Why are Condo Buildings Being Refused Coverage?
A story published by the CBC in September tells of a building in Fort McMurray called Winchester Greens that somehow escaped the 2016 fire with only smoke damage. But three years have passed, and this year their insurer refused to renew their coverage. The board’s search for new protection has failed thus far, as the coverage offered would only cover a quarter of the building’s replacement cost and would result in condo owners having to pay about $500 extra each month on their condo fees. A representative of the building management company said that the reason, she believes, is the number of catastrophic weather incidences across the country.
Another, more recent, CTV article reports on a Calgary building going through the same thing, with their collective premium rising from around $69,000 to more than $322,000. The provider echoes the sentiments expressed in the CBC article, saying that the overall number of claims have been increasing, as has the replacement cost for damages.
What to Look for in Condo Docs When Purchasing
As everyone knows, avoiding claims altogether is the very best way to avoid seeing your rates rise and having trouble at insurance renewal time. But even before that, when you purchase a condo it’s always a very good idea to have a careful condo document review carried out by experts. They will study the by-laws, the reserve fund, the building expenses, the building’s insurance documents, and minutes from general meetings of the condo board.
A condo document review will tell you several things, including:
- Persistent problems, such as leaky roofs and plumbing, that have resulted in repairs having to be made or insurance claims having to be filed.
- If there are any structural deficiencies to the building.
- If the building has current and adequate insurance coverage.
- If there is an operating deficit that could result in a large special assessment or condo fees going up.
- If the reserve fund is healthy, if there have been regular, five-year reserve fund studies (required by law), and if there is a reserve fund plan for future repairs and upgrades.
- If the corporation that owns the building is in good financial shape.
- If there are any restrictions regarding pets, a home-based business, use of the balcony, and so on.
A condo document review is an excellent way to figure out whether you are making a sustainable purchase, and, with the exception of unexpected and devastating weather incidences, can help you predict whether or not insurance claims will be an issue that will cost you down the road. A condo document review will also assist with foreseeing whether a special assessment may be in the future, which is a supplementary charge that can be imposed upon homeowners that is in addition to regular condo fees to perform repairs to building envelopes, foundations, roofs and common areas when there is not enough capital in the condo association’s operating budget or reserve funds.
To protect yourself, ensure your condo insurance includes special assessment coverage, called loss assessment protection. Not all special assessments will be covered, only those that are insurance related, but this coverage is a minimal charge on top of your regular policy and will provide additional peace of mind.
Condo Insurance in Calgary: Make Sure You’re Covered
Lane’s Insurance is a full-service brokerage that works for you, not the insurance companies. Our clients receive access to the lowest possible Calgary condo insurance rates provided by our partners, as well as attentive service and extensive claims support. Visit Lane’s Insurance online for a free quote, or contact your local Lane’s Insurance office.