Insurance policies are designed to protect the purchaser from unexpected losses. Strata insurance policies are no different; they are designed to protect owners against liability for property damage and bodily injury, and in British Columbia all stratas must obtain and maintain that coverage. While insurance policies have many features, two of the critical ones are the policy premium (how much you pay up front) and the policy deductibles (how much you pay when making a claim, which often varies depending on the nature of the loss).
As many of you know, the strata insurance market has seen premiums and deductibles skyrocket, and according to the BCFSA, that’s unlikely to change anytime soon. For strata owners, the hike in premiums impacts you directly through rising maintenance fees, but what about the impact of the change in deductibles?
The higher deductibles will affect you in two ways:
1. Your strata will no longer be able to make claims that would have been covered under your previous policy deductibles.
For example, if your strata previously had an insurance policy with a $10,000 deductible and experienced a loss of $45,000 due to a water leak, you used to pay the $10,000 deductible and the insurer would cover the balance. Now, assuming your deductible has risen to $75,000, all $45,000 of the water loss would need to be paid by your strata.
This means that when something does go wrong, you are less likely to be able to rely on your insurance to help.
2. You will personally pay more for condo insurance.
On top of the higher premiums you pay via your maintenance fees, your own personal insurance policy costs will rise. Why? Your policy – in addition to covering your personal property and any improvements to your unit – used to be based on covering the strata’s previous deductible if the loss originated in your unit. This means that your insurer’s exposure was your loss plus the strata’s $10,000 deductible. Now, your condo insurance policy should cover the new strata deductible, which for purposes of example may now be $75,000. With some strata deductibles rising to $250,000 or more, some owners can’t secure enough coverage at any cost!
The result of this is that your own policy premiums are going to rise (and it’s likely your personal deductibles will rise too!).
The bottom line for owners of strata properties is that until the market conditions change, they’ll be paying more – much more – for both their strata’s insurance and their own.
Curious about your strata? See how you stack up against other stratas of a similar type and age. Ask your property manager or sign up and run a free Eli Report.
Realtors with active listings or interested clients can register here – your first report is always free.