There is a lot of confusion out there by buyers and real estate salespeople as to what insurance is required when buying a condominium. The mistake is that some condo buyers think that the household insurance is somehow covered by their common expense payment each month. In most cases, it isn't and the buyer will still have to pay for part of the damages, even if they have done nothing wrong.
Condominium buildings do have an insurance policy that insures the building and the units but it does not cover everything and there are deductibles involved. It will not cover should damage occur, whether by a leaking pipe, fire or smoke damage. A building insurance policy typically will cover common areas, such as the structure, lobby and elevators, but does not cover an owner’s personal belongings. Nor does it cover any improvements that you have made to your unit or if you damage someone else’s unit or property or someone gets hurt while visiting your unit. As a result, most condominium buyers purchase a policy that provides coverage for their contents, any upgrades that they do to their unit and liability insurance to protect them if someone gets hurt visiting their unit.
Upgrades can include hardwood floor, ceramic tiles, carpets, cabinetry, appliances, counters and perhaps a sound system that you installed in your unit. The good news is that you can buy insurance to protect yourself from this type of liability.
Unit owners are generally responsible for any repairs and maintenance for anything in the unit itself. For this reason, it is generally advisable to have a condominium inspected by a home inspector to look at the plumbing, HVAC or other systems that may be the unit owner’s responsibility to maintain and repair, should a breakdown occur.
If you are buying a townhouse, then generally you will be more responsible for anything that occurs inside your home, so ensure that it is properly inspected before you buy and that you have your own sufficient insurance coverage over items that may not be covered by your condominium policy, such as flooding or sewage backup.
When you are buying a condominium, speak to the management company before and if necessary, the insurance company that insures the building, to make sure you understand what is covered and what isn’t.
In every condominium status certificate, there is a summary given of the insurance policy for the building, including any deductibles. One way to protect yourself is to send this certificate to your own insurance company and tell them that you wish to buy extra coverage for the deductibles noted on the policy. A good idea would be to use the same insurance company that your building is using for your own insurance package. This company likely understands the deductibles better than anyone and will make sure that your package covers any gap that may exist in the building insurance policy.
If you are buying a condominium as an investment, you still need to make sure that you have this type of insurance protection. Most tenants purchase insurance for their belongings and to cover liability. If you want the tenant to also pay for insurance for the deductibles, you need to say so in your lease agreement and make sure that the tenant provides proof that they have obtained all required insurance coverage before you give them the keys to the unit.
When you understand the insurance you need before you move into a condominium unit, you will be prepared should anything occur later.
By purchasing the right kind and amount of insurance before you move into your condo, you will avoid unwanted surprises or assessments if something happens later. If you need any help or have any questions concerning buying a condo, don't hesitate to contact me.
Source: thestar.com, Why condo owners need household insurance by Mark Weisleder
Re/Max Rouge River Realty Ltd., Brokerage
905-668-1800 or 905-427-1400