In a condominium, condo insurance relies on two complementary types of coverage: the condominium corporation’s insurance policy and the unit owner’s insurance policy. Yet many people are unsure where one policy ends and the other begins. This confusion can lead to significant costs when a loss occurs.
According to the Insurance Bureau of Canada (IBC), nearly one condominium owner in five is unaware that they are covered by two separate insurance policies, and half do not know the amount of the deductible their condominium corporation would have to pay in the event of a claim.
Here is a clear overview of who insures what, who pays in the event of a loss, and what to review to avoid unpleasant surprises.
One of the main sources of confusion is the division of responsibilities.
The condominium corporation’s insurance policy covers the building itself, including the structure, roof, hallways, other common elements, and property owned by the corporation. It also covers the building portion of private units according to the unit description maintained by the corporation.
The unit owner’s insurance policy complements this coverage by protecting personal belongings, improvements or upgrades made to the unit, and personal liability. Depending on the policy, additional coverages may also help pay for certain living expenses or the owner’s share of a special assessment related to a loss.
The two policies work together: one protects the building, while the other protects the unit owner.
According to a survey by the Insurance Bureau of Canada (IBC):
These findings highlight a common issue: many condominium owners do not fully understand how responsibilities are divided between their own insurance policy and the corporation’s policy.
The reference unit, sometimes called the description of private portions, defines the unit’s original condition and makes it possible to distinguish any improvements that have been added over time.
This description is essential because it determines which items fall under the condominium corporation’s insurance policy and which must be insured by the unit owner.
When improvements represent significant value, it may be worthwhile to consider them when reviewing insurance needs and to evaluate whether a high-value home insurance solution would be more appropriate.
When a condominium corporation submits a claim to its insurer, the payment it receives is reduced by the deductible specified in the policy.
This deductible is generally treated as a common expense. The corporation may draw from its self-insurance fund or allocate the cost among unit owners according to their share of ownership.
If a person is responsible for the loss, the corporation may pursue recovery against that individual. However, responsibility must first be established. It should not automatically be assumed that the owner of the unit where the damage originated will be solely responsible for paying the deductible.
To avoid unexpected costs, it is important to know the amount of the corporation’s key deductibles, particularly for water damage, and to discuss with an insurance broker how your own policy would respond in different scenarios.
Before buying a condominium or renewing your insurance policy, it is worth reviewing:
Condo insurance is about much more than comparing premiums. It is important to understand the description of private portions, assess improvements made to the unit, know the corporation’s deductibles, identify exclusions, and ensure coverage reflects the realities of the building.
At Lareau, our property and casualty insurance brokers help clients both before purchasing a condo and at renewal time to ensure their coverage truly matches their unit, their building, and their lifestyle, rather than relying on a one-size-fits-all solution.
Our property and casualty insurance brokers can review your situation, whether you are about to purchase a condominium or are preparing to renew your insurance policy.
