Apartment owners are facing growing insurance bills for damage to common areas

Many condominium buildings raise their deductible, which helps lower the annual cost of insurance, but the cost of a higher deductible is then transferred to condominiums when a building files a claim.DARRYL DYCK / The Canadian Press

Condominium Owners Across Canada could be on the hook to pay for expensive damages on building common areas as condominium boards try to limit the cost of increasing insurance premiums by increasing the deductible on policies – in some cases raising them to $ 150,000 from $ 10,000 at the moment.

Industry experts say that partial costs of damage to common areas caused by an apartment owner’s unit, such as a leaking washing machine that floods once, are typically transferred by the condominium company to the responsible co-op member, who is required to pay the deductible – uninsured part of the damages.

“This is a disaster waiting to happen as there has been very little communication from condominium boards as they increase their deductible, leaving many condominiums at risk of having to pay tens of thousands of dollars out of pocket,” said Sabine Ghali, director for Buttonwood Property Management Inc. in Toronto.

Condominium companies – also known as strata companies in some provinces – are legally obliged to buy insurance to cover damage to common areas in their buildings. Like insurance for individuals, these contracts have a deductible that is not covered and must be paid out of pocket by the condominium company if it makes a claim.

No easy solutions to the complex problem of high condominium insurance premiums, says BC report

Many condominium companies are run by a group of individual condominiums who are also responsible for trying to prevent the monthly condominium fees from rising. But it has become increasingly difficult as insurers have sharply increased premiums – sometimes doubling them or more – as claims costs rise.

To mitigate higher premiums, many buildings choose to raise their deductible, which helps lower annual insurance costs. The cost of one higher deductibles are then transferred to condominiums when a building files a claim for damages – a practice known as a reversal.

For example, if a kitchen fire in a condominium damages an elevator, the unit owner will be responsible for paying the building’s full deductible.

Most apartment owners have insurance policies that cover the deductible reimbursed by condominium companies, but only for the “more traditional” maximum amount of $ 10,000, said Ms. Ghali, who manages condominium buildings throughout the Toronto area.

The number of buildings that have increased their deductibles has been accelerating over the past year, she said, with many condominium boards only communicating the changes in annual updates, which are usually sent out in newsletters.

Ms. Ghali said the increase in deductibles should not be communicated in a format that could “get lost in the shuffle”. Condominium boards need to do a better job of educating condominiums about building and unit insurance – especially about how much return coverage owners of condominiums currently have and which insurance companies will cover a new higher amount.

“Some insurance companies have a cap on what they will cover for deductibles, which means apartment owners may be in a pinch to find a new policy altogether,” Ms. Ghali.

The recent increase in deductibles is due to the rising cost of insurance, says Rob de Pruis, director of consumer and industrial relations at the Insurance Bureau of Canada, a national industry group with 74 insurance company members.

“The industry has seen an increase in claims costs in all sorts of different areas – not only in property claims, but also in claims claims,” ​​said Mr. de Pruis. “The harsh weather we’ve seen in British Columbia, along with macroeconomic factors like low interest rates, are pushing up the price of insurance premiums.”

“And like your car insurance, one way to help lower your insurance premium is to increase your deductible.”

Sir. de Pruis said that shifting the rising cost of premiums from a company to an individual member does not solve the root cause of the price increases, which is the rising cost of claims.

In the summer of 2020, the IBC set up a national commercial insurance task force to hold roundtables to address several consumer concerns about the affordability of commercial insurance, including the strata-commercial insurance market, and in particular in British Columbia and Alberta.

IBC published a series of recommendations to the industry, including a proposal to regulate building maintenance and make it more efficient (to reduce the number of damages), to train condominium companies in how to improve their risk profile and thereby qualify for better premiums, and put a ceiling on the amount a condominium company can charge its members at its own risk.

Alberta recently made changes to allow condominium companies to only charge up to a maximum of $ 50,000 of a deductible from a co-op.

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