When buying a house, most people wouldn’t think twice about purchasing home insurance. However, did you know you also need home insurance when buying a condo?
A recent study done by Abacus Data and Allstate Insurance found that Canadians are not all that savvy when it comes to condo insurance. For instance, 74% of prospective condo buyers didn’t know what their personal insurance should cover versus what the condo corporation’s insurance would cover. And 64% of current owners didn’t know that their building’s insurance policy would not cover damage to another unit if a flood or fire started in their own.
While it’s important to know that you need to purchase additional insurance when you buy a condo, it’s equally important to understand that certain elements may already be insured through your building. Here’s a breakdown of the different types of condo insurance you should be aware of:
Standard Unit Insurance
Some first-time condo buyers might wrongly assume that their monthly condo maintenance fees cover them insurance-wise. While it is true that a certain portion of these maintenance fees are allocated to your condo corporation’s master insurance policy, it doesn’t cover everything.
This allocated portion of your maintenance fees – also known as Standard Unit Insurance – will cover damage to any common areas of your building, such as the lobby or elevators. Additionally, it also covers the “standard” features in your condo unit, such as your flooring or kitchen counters. However, if you purchased any custom upgrades within your unit – let’s say you got real hardwood floors instead of the standard laminate the builder used – you’d only be covered for damages up to the cost of the original materials, not your custom upgrades.
New Home Warranty Insurance
Purchasing a pre-construction condo differs from purchasing a resale condo in many ways, and insurance is no exception. In most provinces, your pre-construction (or brand new) condo will come with New Home Warranty Insurance. This coverage is unique to new builds, as it covers you against any defects in workmanship or materials for up to one year.
Typically, the fee for this type of insurance is included in the purchase price of your new condo, though it can also appear on your statement of adjustments. Depending on where you live, New Home Warranty Insurance may or may not be mandatory, and programs may differ based on location. For example, all new condos in Toronto come with New Home Warranty Insurance via Tarion, but no other provinces use them. Be sure to check the rules and restrictions based on where you live before making any changes to your unit.
What to Look For When Purchasing Additional Insurance
Since you now know that your Standard Unit Insurance isn’t enough, you’ll want to purchase additional home insurance that will cover any upgrades or improvements you made to your unit, as well as your personal property within the unit.
There are two common types of coverage available for your personal property. Cash value compensation is your basic coverage, replacing the original value of an insured item minus any depreciation. Replacement cost coverage comes at a higher monthly premium, but covers items at their full price. For example: your damaged couch would be replaced with a new couch of the same value today, if something happened to it.
In addition to covering any unit upgrades and personal property, your insurance should also include provisions for loss assessment; this protects you in the rare instance your building’s insurance policy did not cover all damages to the building, and outstanding costs were passed down to individual owners.
Finally, your comprehensive coverage should also include insurance for any liability for harm you might cause, and the financial burden that comes with it. Typically, this kind of liability insurance protects you from paying out-of-pocket for any damage you might cause to other people or property.
When you start thinking about buying a condo, it’s important to do your research and make sure you’re getting the right kind of insurance coverage. Find out exactly what your condo corporation’s insurance policy covers, so you can determine what holes your personal policy will need to fill. Know what your deductibles are, and do an inventory of your personal property, so you can be sure you’re purchasing sufficient coverage. By doing a proper assessment of your situation before purchasing a condo and insurance, you’ll be able to avoid any unwanted surprises down the road.