I constantly hear buyers of condos saying they don’t need to buy “contents” insurance as they don’t have “stuff” of much value. BIG MISTAKE!
There are two types of insurance when you are buying a condo or any strata titled property including townhouses and duplexes: a Master Policy and an Owner’s Policy.
The Master Policy covers the entire complex and insures against fire, water damage, public liability for the common property, perhaps earthquake, etc. This insurance is paid for as part of your strata fees. As with detached homes if you have a mortgage your lender will be added as a “loss payee” under the policy which provides your mortgage lender additional security in the event of loss or damage to your strata unit or the complex.
So what’s the big deal about an Owner’s Policy? An Owner’s Policy covers not only an owner’s contents but perhaps more importantly it includes the following coverage:
• Damage to any improvements that were made subsequent to the original construction of the unit;
• Additional living expenses if an owner needs to move from their unit while repairs are being made in the event of an insured loss;
• Payment in full or part of any deductibles payable in the event of a claim under the Master Policy;
• And most importantly in the event any claims under the Master Policy are as a result of negligence by a strata owner your Owner’s Policy will pay all or a portion of the damages.
It is important to note that a “betterment” clause will have to be included to cover damage to any renovation upgrades that were made subsequent to the original construction of the unit.
The last item of coverage is critically important. The major cause of claims under Owners’ Policies is due to water damage caused by the negligence of an owner – often as a result of an overflowing bathtub or renovations gone wrong. In the past year at least three of our clients caused water damage to adjacent units. In one situation it involved a significant number of units. Two of our clients had obtained an Owner’s Policy and although there was great stress and inconvenience most of the damage was covered under their Owner’s Policy. The owner who did not have coverage ended up writing a very large cheque to pay for damage to an adjacent unit and common property.
So don’t delay – if you are buying a strata titled property make sure you get an Owner’s Policy effective as of the completion or closing date.
Your new home is your biggest asset – make sure you protect it and yourself.