Effective claims management and risk minimization are the cornerstone of a financially healthy condominium or strata corporation.
With insurance premiums skyrocketing in the past years, where some buildings have experienced premium hikes of 15-30%, councils are facing unprecedented pressure to protect their communities’ financial health.
This how-to manual provides practical solutions to help councils navigate the complex insurance landscape, while maintaining healthy reserve funds and preventing costly special assessments.
All while maintaining long-term building health. Let’s dive in.
The High Costs of Poor Claims Management
Ineffective claims management can result in massive financial burdens. An example? Some Abbotsford condo owners experienced an astounding 780% increase in rates—from $66,000 in 2019 to $588,000 in 2020.
These trends of rising insurance costs for strata and condo corporations looks to be softening in 2025, which is great news.
Here’s how poor management contributes to such situations:
1. Delayed Reporting and Documentation
When councils fail to properly manage claims, several critical risks emerge. First, inadequate documentation and delayed reporting can lead to claim denials, forcing the corporation to absorb costs that should have been covered by insurance.
2. Substandard Repairs
Second, poor vendor oversight during repairs can result in substandard work that creates future liability.
3. Recurring Issues
Third, the failure to implement preventive measures means recurring issues that steadily erode reserve funds.
Financial Consequences
Deductibles for policies can start at the $1,000 mark but over the past decade, we’ve seen certain deductibles like things like earthquake and sewer backup increase into the hundreds of thousands. A single poorly managed claim often triggers costly special assessments, straining homeowners’ finances and souring community relationships.
A history of frequent claims increases premiums or leads to coverage denials, threatening insurability and property values.
Legal Risks
Legal liability exposure for council members also escalates when claims are mishandled. Directors and officers can face personal lawsuits if their decisions during crisis situations are deemed negligent or improper, making comprehensive D&O insurance essential but not sufficient protection.
Understanding Insurance for Strata & Condo Corporations
To manage claims confidently, councils must fully grasp the layers of insurance coverage and how they interact.
Important Insurance Coverages
The Canadian strata insurance system is founded on a twin-layer design that has tightly coordinated corporate and individual policies. This design is central to the handling of claims.
1. Strata Insurance
Strata Corporation Insurance forms the primary layer, covering common property, building structures, and original fixtures. Property insurance must be for full replacement value and insure against major perils including:
- fire,
- lightning,
- smoke,
- windstorm,
- hail, water escape, impact by aircraft and vehicles,
- vandalism and malicious acts.
This policy also includes liability insurance for a minimum of $2 million, though many corporations wisely choose higher limits.
2. Individual Unit Owner Insurance
Individual Unit Owner Insurance provides the second layer, protecting personal property, improvements, and covering the owner’s share of deductibles.
If an insurance claim for a strata corporation originates in an owner’s unit, then the strata corporation can sue the strata lot owner for the deductible if the owner is deemed responsible for the loss.
Importantly, responsibility doesn’t require fault — an overflowing dishwasher can make the unit owner liable for the full corporate deductible even without negligence.
3. Directors and Officers (D&O) Liability Insurance
It protects council members from personal lawsuits arising from their management decisions. Strata associations recommend that strata corporations purchase Directors and Officers Liability Insurance for their strata council and any staff such as a strata property manager.
This coverage has become increasingly important as councils face more complex decisions about building maintenance, financial management, and owner disputes.
Reviewing and Understanding Policies
Coverage Limits
Annual policy reviews require systematic attention to several critical sections. Begin with coverage limits and ensure they reflect current replacement values — outdated appraisals can leave significant gaps in protection.
Deductibles
Examine deductible structures carefully, as deductibles can range from $1,000 to $250,000 and higher depending on the number of units and the strata corporation’s claims history.
Exclusions
Pay particular attention to exclusions, which often surprise councils during claims. Standard policies typically exclude earthquake coverage, requiring separate consideration for seismic risks. Water damage exclusions may apply to specific scenarios like flooding versus water escape, creating important distinctions during claims.
When to Involve Your Insurance Broker
Understanding when to involve your insurance broker versus handling matters internally can save significant time and money. Broker involvement is essential for policy changes, claim disputes, and coverage interpretation, while routine maintenance issues and minor incidents can often be managed through established protocols.
Other Provincial Considerations
British Columbia
The Strata Property Act mandates thorough property insurance for all strata properties. Recent updates now require councils to promptly inform residents of deductible changes or other policy updates.
Ontario and Alberta
Ontario enforces stricter reserve fund studies and financial reporting, while Alberta has unique disclosure requirements regarding insurance changes. Councils should familiarize themselves with their provincial requirements to ensure compliance.
Recommended Reading: Condo Fees in 2025 Across Canada: Data & Insights
Building a Risk Mitigation Plan
Essential Risk Assessment Areas
1. Building Envelope
Building Envelope Risks represent the most significant exposure for most corporations. Regular inspection of roofing systems, window seals, balcony waterproofing, and exterior wall integrity prevents the water damage claims that drive premium increases. Focus particular attention on aging building components approaching their expected lifespan.
2. Water Damage
Water Damage Prevention requires systematic monitoring of plumbing systems, drainage infrastructure, and flood-prone areas. Install water sensors in mechanical rooms, monitor pipe conditions in aging buildings, and maintain clear drainage systems to prevent the costly water claims that have dominated recent insurance challenges.
3. Fire
Fire Safety and Prevention encompasses electrical system maintenance, common area hazard elimination, and emergency preparedness. Regular inspection of electrical panels, adherence to electrical codes during renovations, and proper maintenance of fire safety systems reduce both risk and insurance premiums.
4. Slip & Fall
Slip and Fall Liability focuses on the maintenance of pedestrian ways, adequate lighting, and comprehensive winter maintenance programs. These relatively minor investments prevent significant liability claims and demonstrate proactive risk management to insurers.
Implementing Regular Inspections
Monthly Inspections:
- Use a standardized checklist to review:
- Building envelope conditions
- Safety hazards
- Maintenance needs
- Document findings with photos.
- Keep inspection logs for insurer reference.
Annual Inspections:
- Hire qualified specialists for:
- Structural assessments (engineer)
- Envelope evaluations (roofer)
- System safety checks (electrician)
- Schedule inspections in line with:
- Insurance renewals
- Budget planning cycles
Vendor Management and Contractor Oversight
Managing vendors and contractors effectively is key to protecting the Strata Corporation. Here’s how to do it right:
1. Proper Contractor Vetting
- Verify insurance coverage, including:
- Commercial general liability
- Workers’ compensation
- Professional liability (if applicable)
- Ensure insurance requirements are clearly outlined in contracts.
- Always obtain certificates of insurance before work starts.
2. Strengthen Your Contracts
- Include these key clauses:
- Indemnification provisions to protect against claims.
- Warranty requirements for completed work.
- Clear scope definitions to avoid misunderstandings.
- Add supervision requirements for larger projects.
- Set clear protocols for change orders and additional work requests.
3. Stay on Top of Warranty Claims
Follow up systematically on completed work.
- Report deficiencies promptly while within warranty periods.
- Keep detailed records of:
- All contractor work
- Warranty terms and claims
By staying organized and proactive, you can streamline vendor management and minimize risks related to contractors.
Tips for Smart Claims Management
Managing Small Strata Insurance
Have a First Response Protocol
Immediate safety assessment takes priority in any incident. Establish clear emergency contacts and ensure council members know when to call emergency services, utility companies, or building professionals. Train key personnel in basic safety evaluation to make informed decisions about building evacuation or area isolation.
Step 1
Photo documentation should begin immediately after ensuring safety. Capture multiple angles of damage, include reference objects for scale, and photograph both the immediate damage and surrounding areas that might be affected. Time-stamp all documentation and maintain separate copies in different locations.
Step 2
Initial notification timelines vary by insurer but typically require reporting within 24-48 hours. Contact your broker immediately rather than attempting to determine coverage yourself — prompt professional assessment often improves claim outcomes significantly.
Step 3
Evidence protection involves securing damaged areas while allowing necessary emergency repairs. Document the condition before any temporary repairs and obtain insurer approval for emergency expenditures to ensure reimbursement.
Working with Insurance Adjusters
Preparation for adjuster visits requires gathering all relevant documentation including maintenance records, previous inspection reports, and photographs of pre-loss conditions. Assign a single point of contact to work with the adjuster and ensure this person understands the building’s history and systems.
Professional presentation of documentation demonstrates competent management and supports favorable claim resolution. Organize materials chronologically and provide clear summaries of relevant building history, previous maintenance, and current issues.
Managing Deductible Situations Strategically
The decision to file claims versus paying out-of-pocket requires careful analysis of deductible amounts, reserve fund impact, and claims history implications. The strata corporation can pay for a strata corporation’s insurance deductible from the contingency reserve fund without requiring the usual 3/4 vote of approval by owners, providing flexibility for immediate response.
Reserve fund impact analysis should consider not just the immediate deductible cost but also the long-term implications of claims frequency on future premiums. Building deductible history awareness helps councils understand patterns and make informed decisions about claim filing thresholds.
Special assessment considerations become critical when deductible costs exceed available reserves. Plan communication strategies with owners about assessment necessity and timing, and consider payment plan options to ease individual owner burden.
Common Claims Pitfalls to Avoid
Inadequate documentation remains the leading cause of claim complications. Maintain comprehensive records of building conditions, maintenance activities, and incident responses.
Poor documentation can turn straightforward claims into disputed denials.
Delayed reporting compounds problems and may void coverage entirely.
Establish clear protocols for immediate notification and ensure multiple council members understand reporting requirements and procedures.
Pre-Loss Documentation
Annual building condition photography should capture all common areas, building systems, and potential problem areas. Create systematic photographic records that can establish pre-loss conditions and support future claims. Store these records securely and update them regularly.
Maintenance records and receipts demonstrate proper building care and can support claims where maintenance-related issues are questioned. Maintain comprehensive files for all building systems and update them with each service call or repair.
Vendor certifications and insurance certificates should be collected and filed for all contractors working on the property. Anyone handling strata corporation funds should be covered by fidelity bonding or insurance as claims for misappropriation of funds are typically excluded from the strata corporation’s property and liability policies.
During-Claim Documentation
Detailed incident reporting forms should capture all relevant circumstances, witness information, and immediate response actions. Standardize reporting formats to ensure consistency and completeness across different types of incidents.
Photo and video evidence protocols require systematic documentation of damage progression, repair activities, and final restoration. Maintain chronological records that tell the complete story of the incident and response.
Contractor estimates and scope documentation should include multiple estimates for significant repairs, detailed descriptions of work required, and justification for selected approaches. This documentation supports claim validity and helps prevent disputes over repair necessity or cost.
Special Assessment Prevention
Early intervention strategies for emerging issues require systematic monitoring of building conditions and prompt response to developing problems. The cost of preventive maintenance is almost always lower than emergency repairs plus deductible obligations.
Balancing immediate repairs versus planned replacements requires strategic thinking about building lifecycle and budget planning. Consider whether emergency fixes might be better invested in complete replacement, particularly for aging systems approaching end-of-life.
Communication strategies with owners about preventive spending should emphasize long-term cost savings and risk reduction. Present clear comparisons between preventive costs and potential claim costs including deductibles and premium impacts.
Financial Monitoring and Reporting
Monthly financial health indicators should include reserve fund balances, insurance cost trends, and maintenance expense patterns. Track these metrics consistently to identify developing problems before they become critical.
Red flag metrics that signal potential problems include
- rapidly increasing maintenance costs,
- frequent small repairs to the same systems,
- owner complaints about building conditions, and
- insurance premium increases exceeding market averages.
Transparent communication with owners about financial decisions builds trust and support for necessary expenditures. Regular reporting on risk mitigation activities and their financial benefits helps justify proactive spending and prevents owner resistance to necessary assessments.
Final Thoughts
The current insurance environment makes these practices more important than ever. Long-term benefits for community financial health extend beyond immediate cost savings.
Buildings with strong risk management practices maintain better insurance relationships, preserve property values, and create more stable living environments for all residents.
The investment in proper claims management and risk mitigation pays dividends through reduced special assessments, stable insurance costs, and enhanced community value.