Your Condominium Purchase and Insurance

Rachel in Legal, Condo Buying 

Very few people give a second thought to insurance coverage issues until disaster strikes – arguably not the best time to start wondering if you have enough coverage from your policy of insurance.  Perhaps I am being unnecessarily dramatic, because the truth of the matter is that a claim can be triggered for far less than a disaster, yet the consequences can be costly if you don’t have the right policy.

If you own a condo, the condominium corporation will carry insurance for the building, meaning the units and the common areas, however you as the unit owner are responsible for obtaining insurance for your belongings and also for any upgrades you have made to your unit.  What constitutes your unit for the purposes of determining your coverage under the condominium corporation’s policy is typically called the standard unit, and will be defined in the package that you received from the condominium corporation.  If it seems unclear, refer to the ‘standard features’ list that is typically provided.  If what you are looking at is not in the list, you need additional coverage. 

At a recent seminar I attended, a leading expert in the area of condominium law, Audrey Loeb, had some practical advice for purchasers.  She stressed that people should deal with an insurance broker or agent that has experience dealing with condo insurance.  This will help you make an informed decision as to the kinds of coverage needs you can anticipate, common claims and the things to guard against.  She also urged consumers, where possible, to obtain insurance from the same insurer as the condominium corporation itself.  This will avoid any confusion as to who is responsible for payment should things go awry.

I would also add that your policy of insurance should specifically reference replacement cost.  This is due to the difference between what something is worth, and what you reasonably can expect to pay to replace it.  As an example, if I need to make a claim to replace my ten year old television, the insurer can say that they are only insuring the value of that television today – the depreciated value which is likely not much, not to mention that it will probably be difficult for me to find a similar television (ten years old) at any store in the city.  What you want is replacement cost.  This means that you can go replace the item you lost with a current version and the insurer will cover it – even though it is technically an upgrade.  These are items, among many others, that your insurance agent will be able to help you sort through.

Rachel Loizos is an associate lawyer at Sotos LLP in Toronto. She practices in the area of real estate law. Email Rachel

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