One Condo, Three Policies

This post is written by Trusted Partner, Park Insurance. To become a contributing editor, please contact our Real Estate Investor Solutions Specialist, David Maxwell at david@reincanada.com.

Understanding Insurance for Your Investment Condo

Insuring an investment condo involves three key players: the strata/condo corporation, the unit owner (you), and the tenant. It can be easy to assume the Strata/Condo Corporation’s Master Insurance policy has you covered, but that’s not the case. You need your own policy to fill in the gaps.

Here’s a breakdown of what each policy covers:

Strata/Condo Corporation’s Master Policy

The Strata/Condo Corporation’s Master Insurance policy typically covers the building’s structure and common areas. This includes the roof, walls, floors, elevators, and shared amenities such as swimming pools, gyms, and lobbies. Essentially, it’s designed to protect the overall building and common property that all unit owners share. However, this policy doesn’t necessarily protect the interior of your individual unit from damage or loss. For example, if there’s fire or water damage inside your unit, the Master Policy may not cover repairs or replacement of interior finishes, personal belongings, or improvements you’ve made. Therefore, it’s crucial to:

• Review the strata/condo corporation’s by-laws: These by-laws outline the specifics of what the Master Policy covers and what responsibilities fall to individual owners.
• Read the Master Insurance policy thoroughly: Understanding the extent and limitations of the Master Policy can help you identify coverage gaps you need to address with your own insurance.

Your Policy as the Condo Owner

As the unit owner, your insurance policy should cover several critical areas:

Personal Property & Liability: Your policy needs to cover personal items you keep in the unit, such as appliances, and provide personal liability protection. This ensures that if someone gets injured in your unit or you accidentally cause damage to another unit, you’re covered.

Betterments and Improvements: The Master Insurance policy typically covers the unit as it was originally built by the developer. Any upgrades or improvements made by you or previous owners, such as custom lighting fixtures, upgraded flooring, or renovated kitchens and bathrooms, need to be covered under your policy. These are referred to as “betterments and improvements” and are essential to protect the value you’ve added to your unit.

Loss, Unit, and Deductible Assessments: In the event of a large claim against the Master Insurance policy, or if there’s a high deductible, unit owners can be assessed to cover part of these costs. For instance, if a visitor slips in a common area and sues the strata/condo corporation, and the settlement exceeds the corporation’s coverage limits, unit owners may need to cover the shortfall. Similarly, if the Master Policy has a high deductible for property claims, unit owners might be assessed to pay a portion. Your condo insurance can provide reimbursement for these assessments, ensuring you’re not caught off guard by unexpected costs.

Rental Income Protection: If your unit is damaged by an insured event and becomes uninhabitable, rental income coverage ensures you can still meet your financial obligations despite the loss of rent. This is particularly important for investment properties, as it helps you maintain cash flow while repairs are being made.

Tenant’s Policy

A tenant’s insurance policy usually covers the tenant’s personal belongings and their personal liability. This includes items such as furniture, electronics, clothing, and small appliances. If a tenant accidentally causes damage to your unit, their liability coverage can help pay for repairs. Additionally, their policy can cover temporary living expenses if the unit becomes uninhabitable due to a covered event.

These are just some of the important coverages provided by an investment condo policy. To learn more about the dedicated coverage available exclusively to REIN Members, please review our Strata Guard policy coverage chart.

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Chris Westrop is the Vice President of Commercial Lines at Park Insurance. He has 30 years of experience in the commercial insurance business and is a Chartered Insurance Professional with the Insurance Institute of Canada. He is also a REIN member and a regular attendee at many of our programs. Learn more about Chris and the experienced team of Commercial Insurance advisors at Park Insurance. Chris may be reached at (604) 659-3133 or cwestrop@park.ca.