Some condo buyers think they don’t need household insurance, because it is somehow covered by their common expense payment each month. They should think again.
Although the condominium corporation must carry insurance on the building, it does not cover everything and there are deductibles involved. A recent study by Abacus Data, commissioned by Allstate Insurance found that that 61 per cent of new condo buyers didn’t know, for example, that when a fire or leaky pipe in your unit damages another, you may be personally responsible for the damages, not the condominium insurance policy.
Even if the condominium policy pays for part of the loss, you will likely be responsible for the deductible.
A building insurance policy typically will cover common areas, such as the structure, lobby and elevators, but does not cover an owner’s personal belongings. Nor does it cover any improvements that you have made to your unit or if you damage someone else’s unit or property or someone gets hurt while visiting your unit.
Upgrades can include hardwood floor, ceramic tiles, carpets, cabinetry, appliances, counters and perhaps a sound system that you installed in your unit. The good news is that you can buy insurance to protect yourself from this type of liability.
Ask if any contents coverage includes the items that are stored in your condominium locker for safekeeping. If your locker is owned as a separate unit, you must disclose this to your insurer to ensure that you are properly protected as well.
There is also insurance protection available in some instances when there are claims against the corporation insurance policy for damages to the common elements or lawsuits against the corporation. If there is not enough insurance to pay for the loss or the insurance deductible, special assessments are levied against each of the unit owners to pay for it. You can buy insurance to protect you against these types of special assessments.
Unit owners are also generally responsible for any repairs and maintenance for anything in the unit itself. For this reason, it is generally advisable to have a condominium inspected by a home inspector to look at the plumbing, HVAC or other systems that may be the unit owner’s responsibility to maintain and repair, should a breakdown occur.
If you are buying a townhouse, then generally you will be more responsible for anything that occurs inside your home, so ensure that it is properly inspected before you buy and that you have your own sufficient insurance coverage over items that may not be covered by your condominium policy, such as flooding or sewage backup.
When you are buying your next condominium, do your research in advance. Speak to the management company and if necessary, the insurance company that insures the building, to make sure you understand what is covered and what isn’t. Find out the amount of any deductible. Do an inventory of all of your personal belongings, such as furniture, jewellery, artwork and clothing, so that you can buy sufficient replacement cost insurance if anything happens.
By purchasing the right kind and amount of insurance before you move into your condo, you will avoid unwanted surprises or assessments if something happens later.
Mark Weisleder is a Toronto real estate lawyer. Contact him at firstname.lastname@example.org