Stratas are a popular choice for many Canadians, as they offer convenience, security, unique amenities and value prices. In fact, in British Columbia alone, over 1.5 million people live in stratas. To protect their investment, strata unit owners must purchase coverage that works in conjunction with a strata corporation’s master policy.
A strata corporation’s insurance may cover insured losses to the condo building and common property, but it does not cover your personal contents, liability or improvements to your unit. What’s more, following a major disaster, you could be held liable for the cost of any repairs.
This Coverage Insights provides a general overview of what’s covered in a strata corporation’s master policy and a list of coverages strata unit owners need to consider.
Comparing Policies: Strata Corporations vs. Unit Owners
Unit owners often wrongly assume they do not need coverage because their strata corporation already has a policy. While it is true that strata unit owners are not legally required to obtain insurance in B.C., adequate coverage is highly recommended to avoid major property and financial losses in the event of a claim.
One of the most difficult things to understand is the relationship between a strata corporation’s policy and a unit owner’s policy. The following is a high-level overview of the types of exposures each policy accounts for.
What a Strata Corporation’s Policy Should Cover
- The buildings shown on the strata plan
- Common property such as hallways, stairs, roofs, pools, garages and driveways
- Fixtures built or installed as part of the original construction, including things like floor and wall coverings or electrical and plumbing fixtures
- Strata assets in common areas like furniture and equipment
- The liability of the strata corporation for property damage and bodily injury claims
What a Unit Owner’s Policy Should Cover
- Personal property such as clothing, household items, furniture and items stored in lockers
- Unit upgrades (betterments or improvements)—such as custom hardwood flooring—made by current and previous unit owners
- Expenses over and above the normal cost of living in the event that the unit owner is unable to live in their home following an insured loss
- Unit owner’s personal liability for any bodily injury or property damage unintentionally caused to others
Recommended Policies for Strata Unit Owners
Often, strata associations strongly recommend that strata unit owners and tenants purchase insurance to cover their needs. This is because strata fees only pay for the strata corporation’s insurance—not for homeowners or tenants insurance. As such, unit owners need to account for the following:
Betterments and Improvements
Unit owners need to understand that any improvements they make to a strata are their responsibility. In addition, if a suite has been remodeled by a previous owner, the new fixtures are the unit owner’s responsibility.
These are important considerations to keep in mind when electing condominium/homeowner insurance. Strong policies provide coverage for any upgrades to your unit (e.g., adding in custom hardwood flooring or custom counters).
Unit owners can be held personally responsible for any bodily injury or property damage they unintentionally cause to others. As a result, strata unit owners need their own liability coverage. While strata corporations are required by law to obtain specific limits of liability insurance, unit owners have more flexibility. Work with a qualified insurance broker to assess your risks and secure the adequate level of liability coverage.
Loss Assessment Coverage
Many unit owners don’t realize that deductibles on strata insurance are often their responsibility. If an insurance loss, such as a major fire, were to occur to a strata corporation, unit owners would have to contribute to the deductible. In some cases, a strata corporation may sue a unit owner to recover its insurance deductible, particularly if the owner is responsible for the loss or damage that led to the claim.
This could be a significant expense, as deductibles can easily reach $100,000 or more. What’s more, unit owners may be responsible for a corporation’s deductible even if they aren’t found to be negligent, careless or legally liable.
Unit owners should review the corporation’s insurance policies alongside a qualified insurance broker. Doing so allows owners to purchase sufficient coverage for the strata corporation’s deductibles or for the cost of the loss if it is less than the strata corporation’s deductible. In addition, unit owners may want to consider contingency coverage, which insures their unit if a strata corporation’s insurance policy falls short.
During the underwriting process, unit owners should discuss any other applicable coverages not mentioned in this document, such as insurance for home-based businesses or tenants that rent your unit.
Personal Property and Items Stored in Common Areas
Unit owners will need to secure insurance that protects their personal belongings, including furniture, clothing, electronics and major appliances. A strata corporation’s policy will typically only cover fixtures built or installed as part of the original construction. Essentially, anything that can be removed from a space without causing damage will not be covered under a corporation’s policy. Coverage will also need to account for any personal items stored in common areas such as art on display.
Following an accident, unit owners can be displaced from their unit. As such, in the event that an owner is unable to live in their home following an insured loss, it’s important for unit owners to maintain insurance that covers expenses over and above the normal cost of living.
When it comes to insurance for your unit, remember that a strata corporation will seldom protect your personal property or pay for your living expenses if you are displaced following an incident. Before purchasing your unit, it is imperative that you ask for a copy of the strata corporation’s insurance agreement. That way you are aware of your responsibilities and the amount you need to pay for any deductibles.
Coverage for earthquakes is noticeably absent from the requirements placed on strata corporations. Unit owners should consider purchasing earthquake coverage for their units, particularly if they live in earthquake-prone areas of B.C. Prior to doing so, discuss the cost of the deductible for both the unit owner’s earthquake insurance and the strata corporation’s earthquake insurance with a qualified insurance broker.
Securing the Right Coverage
The underwriting process for stratas can be confusing, especially for first-time owners. Not only do unit owners need to have an understanding of what a strata corporation’s policy covers, they need to assess their risks and secure the right insurance for themselves.
Above all, it’s important to remember that your strata corporation’s insurance may cover insured losses to the building and common property, but it does not cover your personal contents, liability or improvements to your unit. That’s why purchasing your own personal condominium/homeowners policy is so essential.
Only by working with a qualified insurance broker can unit owners properly manage their exposures. Contact us today to speak with a strata expert and learn all about your policy options.
When meeting with your insurance broker, bring a copy of your strata corporation’s bylaws and master policy. This will help in the underwriting process and will ensure that you get the right level of protection.