Strata Insurance Rates are Rising
Understand the risks and protect yourself from them
What has changed?
Over the course of 2019, strata corporations across Canada either received notice of a premium and/or deductible increase on renewal of their building insurance policies, or were advised that they should budget for increases on their next renewal. In B.C.’s Lower Mainland region, where an estimated half of its total 2.7 million residents live in a strata-titled property, these increases are having a widespread impact. One real estate insurance brokerage advised its Vancouver strata corporation clients that they should budget for a 25%+ increase in insurance costs for 2019, possibly higher if the property had suffered losses. Some renewals have reportedly increased anywhere from 50% to 300% and the deductibles to cover claims have also increased substantially, from $25,000 per claim to as high as $250,000 and $500,000; at least one building has had its deductible increased to $750,000.
How does this impact the owners of strata units in B.C.?
Strata unit owners should be aware of the impact on the building policy and their unit policy:
If your strata corporation is faced with a substantial increase in insurance rates, the cost will be reflected in your annual budget that determines your annual strata fees. If the deductible is dramatically increased to $100,000, for example, it means any claims under $100,000 are not covered by insurance and, subject to your bylaws, each owner is likely responsible for damages to their strata lot with the strata corporation responsible for the cost to repair common property. The result is many of the repair and replacement costs that have been covered by the policy of insurance taken out by the strata corporation will now be downloaded onto the affected owners in the event of a claim.
What can owners do to reduce risk?
- Review your strata’s depreciation report to ensure your strata is meeting regulatory requirements, and that the report’s recommendations are reflected in the building’s maintenance and repair plan for items that pose a risk such as roofing, water lines, and drainage systems.
- If your building fails to obtain insurance, contact a lawyer to identify the potential liabilities and risks for owners and council members and what next steps you should consider.
- Ensure that you have access to the water shut-off to the units so you can quickly shut the water off themselves in the event of a leak.
- Verify that units with washing machines have upgraded their hoses to braided steel. Failed rubber hoses in cramped closets and spaces are a chronic cause of water damages.
- Thanks to the soft water in the Lower Mainland you can reduce the amount of soap they use in dishwashers or washers. For later model appliances, use the high-efficiency soap that is recommended. Excess soap suds can build up and temporarily block pipes.
It is imperative that the unit owner has proper condo insurance for your unit. Be sure you understand your strata building’s coverage, limits, and deductibles. Relay those conditions to your insurance broker, who will explain your coverages and options
How to learn about condo risks before you buy?
There are two methods of obtaining records from a strata corporation if you considering purchasing a unit.
Buyers are recommended to request a Form B Information Certificate. The certificate discloses general information about the strata corporation, including judgments against the corporation in the courts or tribunals, the number of rentals, parking space and storage locker designations and allocations, current balance in the contingency reserve fund, and must include a copy of the most recent depreciation report.
The depreciation report is valuable in reviewing future major maintenance and renewal cycles. It will estimate when common components such as roofing, exterior cladding, doors and windows, elevators and plumbing systems are due for replacement and the estimated costs. This will give you an opportunity to compare the balances in the contingency fund with future demands on funds by the corporation.
You also need to obtain a copy of the insurance policy, review the deductible amounts for water escape and other types of claims.
In the event as an owner there is a claim from your strata lot where you are deemed to be responsible, the strata corporation is entitled to proceed to the courts or the tribunal to collect the deductible amount. If the deductible is $50,000 or $100,000, you could be responsible for that amount.
To protect your personal liability against claims or the risk of a deductible, it is vital owners purchase homeowner condominium insurance. Bring a copy of the strata corporation policy to your home insurer and they will assist you in understanding the deductible rates and how they are best covered. It may also be valuable to review the date the policy is renewed.
In these times of a restricted insurance market, a renewal in the next month may result in dramatic changes of the policy depending on the claims history, age and risks of the strata corporation.
Need Guidance? We can help!
If you have questions about purchasing homeowners insurance or a home warranty—or if you would like a referral to a reputable broker—give us a call! We’re here to help.
Sources: 1. The Insurance Brokers Association of B.C. 2. Times Colonist: Condo Smarts