I have heard a few stories of condo buildings having trouble finding insurance. This is troubling for individual owners, even though condo building insurance is different from personal condo unit insurance. Having the documents reviewed prior to a purchase can help find the best options for insurance rates and to ensure you are putting money into safe and well run property.
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.
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. 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.
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.