Purchasing a condo or townhouse in Canada brings unique insurance considerations that many new owners find confusing. Unlike single-family homes where one policy covers everything, condo and strata properties involve two distinct types of insurance: your personal unit owner policy and the strata corporation’s master policy.
Understanding where one ends and the other begins can save you thousands of dollars in unexpected costs and ensure you’re properly protected if disaster strikes.
This comprehensive guide breaks down the essential differences between unit owner insurance and strata corporation insurance, helping both property owners and strata councils navigate their respective coverage responsibilities. You’ll discover critical coverage gaps to avoid and learn how to make informed insurance decisions that protect your investment.
The Basics of the Two Insurances
Canadian strata properties operate under a dual insurance structure that often confuses both new and experienced property owners. This system exists because strata buildings have shared ownership elements — common areas belong to all owners collectively, while individual units remain privately owned.
In short, strata insurance covers the shared or common property of a building, such as hallways, lobbies, and exterior structures. Personal insurance focuses on protecting personal belongings, unit interior improvements, and liability specific to their unit.
Strata Corporation Insurance
Strata corporation insurance (also called the master policy) covers the building’s structure, common areas, and shared facilities. The strata council purchases this policy on behalf of all owners, and the premiums are typically included in monthly condo fees.
This policy protects elements like the building envelope, hallways, elevators, recreational facilities, and the portion of your unit considered part of the building’s structure.
Personal / Unit Owner Insurance
Unit owner insurance (or personal strata insurance) covers your personal belongings, improvements you’ve made to your unit, and liability within your strata lot. This policy also provides crucial coverage for situations where the strata’s insurance may not fully protect you, such as when you’re responsible for damage to other units or common property.
The confusion often arises because the boundary between these two policies isn’t always obvious. For instance, if a pipe bursts in your bathroom wall, the strata policy might cover repairing the pipe and basic drywall, while your personal policy would cover your custom tile work, upgraded fixtures, and any damage to your belongings.
Understanding this division becomes even more critical when you consider deductibles. Strata policies typically carry much higher deductibles than personal policies—sometimes $25,000 or more. If damage originates from your unit, you could be responsible for paying the entire strata deductible, even if the strata’s insurance ultimately covers the repairs.
What to Know About Small Strata Insurance
What Your Personal Insurance Covers
Your unit owner insurance policy serves as your financial safety net for everything the strata corporation’s policy doesn’t cover. This coverage extends far beyond just protecting your furniture and electronics.
Personal Property Coverages
Personal property protection forms the foundation of your coverage, safeguarding your belongings against perils like fire, theft, vandalism, and water damage. This includes everything from clothing and furniture to electronics and jewelry. However, high-value items like art, collectibles, or expensive jewelry may require additional coverage riders to ensure full protection.
Unit Improvement Coverages
Unit improvements and betterments represent another crucial coverage area. When you upgrade your unit with hardwood floors, granite countertops, or custom lighting, these improvements typically aren’t covered by the strata’s basic policy. Your personal insurance can cover the replacement cost of these upgrades, protecting the investment you’ve made in personalizing your space.
Liability Coverage
Liability coverage protects you if someone is injured in your unit or if you accidentally cause damage to other units or common property. For example, if your dishwasher overflows and damages the unit below, your liability coverage can pay for repairs and any legal costs if you’re sued. Most policies provide $1-2 million in liability coverage, but you may want to consider higher limits depending on your assets and risk exposure.
Additional Living Expense Coverage
Additional living expenses (ALE) coverage pays for temporary accommodation if your unit becomes uninhabitable due to a covered loss. This includes hotel costs, restaurant meals, and other necessary expenses while your unit is being repaired. Given the high cost of temporary accommodation in Canadian cities, ensuring adequate ALE coverage is essential.
Loss of Use Coverage
Loss of use coverage compensates you for rental income if you rent out your unit and it becomes uninhabitable due to a covered peril. This coverage helps maintain your cash flow while repairs are completed.
Loss Assessment Coverage
Loss assessment coverage protects you when the strata corporation faces costs that exceed their insurance coverage or when special assessments are levied for insurable losses. This can occur when damage exceeds policy limits, when the strata faces uninsured losses, or when multiple claims exhaust the policy’s aggregate limits.
For example, if the building suffers flood damage that costs $3 million to repair but the strata’s policy only covers $2 million, unit owners might face special assessments to cover the shortfall. Loss assessment coverage can pay your share of these assessments, typically up to policy limits of $50,000 to $100,000.
Earthquake Deductible Coverages
British Columbia’s seismic activity makes earthquake coverage a critical consideration for strata properties. Most strata corporations carry earthquake insurance, but these policies typically feature percentage-based deductibles that can reach 10-15% of the building’s insured value. For a $50 million building, this could mean a $5-7.5 million deductible.
Unit owners can purchase earthquake deductible insurance that covers their proportionate share of the strata’s earthquake deductible. This coverage is relatively inexpensive but can save you tens of thousands of dollars if earthquake damage occurs. The coverage typically calculates your share based on your unit entitlement as outlined in the strata plan.
Recommended Resource: Earthquake & Flood Insurance: Considerations for Your Area
What Your Strata & Condo Corporation Insurance Covers
The strata corporation’s master policy covers the building’s structure and common elements that all owners share. Understanding this coverage helps you avoid gaps and ensures you’re not paying twice for the same protection.
Structural Coverages
Building structure coverage protects the fundamental elements of your building, including exterior walls, roof, foundation, and the structural components within your unit such as original flooring, basic fixtures, and standard finishes. The policy covers repair or replacement costs when these elements are damaged by covered perils like fire, windstorm, or water damage.
Common Property Coverages
Common property insurance extends to all shared spaces and facilities. This includes lobbies, hallways, stairwells, elevators, parking garages, storage lockers, recreational facilities like gyms or pools, and mechanical rooms. If the building has amenities like a concierge desk or party room, these fall under the strata’s coverage.
Liability Coverages
Third-party liability protects the strata corporation when someone is injured in common areas or when the building itself causes damage to neighboring properties. For instance, if a visitor slips in the lobby or the building’s roof collapses onto a neighboring property, the strata’s liability coverage responds.
However, strata insurance comes with significant limitations. The policy typically covers only basic, builder-grade materials and finishes. If your unit originally had carpet and you’ve installed hardwood, the strata policy would only pay to replace carpet. The coverage also excludes your personal belongings entirely—if a fire destroys the building, the strata insurance rebuilds the structure but replaces none of your possessions.
Recommended Resource: Operating & Contingency Reserve Funds for Condos & HOAs in Canada
Other Important Things to Know for Strata Insurance
For Strata Councils
Strata councils play a critical role in understanding and managing the complexities of strata insurance policies. Here are some key points to consider.
Tip #1: Annual Insurance Reviews
Annual insurance reviews have become critical as the Canadian strata insurance market continues to face challenges with rising premiums and reduced coverage availability. Councils should engage experienced strata insurance brokers well before renewal dates to ensure adequate time for market shopping and policy review. Document all insurance decisions in meeting minutes and maintain clear communication with unit owners about coverage changes, deductible amounts, and any coverage restrictions.
Tip #2: Proper Risk Management
Implementing proper risk management practices can help control insurance costs. This includes regular building inspections, prompt maintenance of building systems, installation of water leak detection systems, and maintaining detailed records of all incidents and claims. Consider conducting building depreciation reports not just for maintenance planning but also to support insurance underwriting and ensure adequate coverage limits.
Tip #3: Have Clear Protocols in Place
Establish clear protocols for handling insurance claims and ensure council members understand their role in the claims process. Maintain relationships with qualified contractors and restoration companies before disasters occur, as this can expedite repairs and reduce overall claim costs.
Recommended Resource: How to Easily Understand Strata Minutes in BC
For Unit Owners
If you’re a unit owner, your insurance coverages play an important role into the protection of property and your things. Here are some other important tips to consider.
Tip #1: Get Info From Your Strata / Condo Master Policy
Ask your strata council specific questions about the master policy: What is the current deductible amount? What perils are covered and excluded? Are there any coverage restrictions or unique policy conditions you should know about? How does the strata handle deductible charges when damage originates from individual units?
Tip: #2: Use an Insurance Broker or Company for Coverage Understanding
Work with insurance brokers who specialize in strata properties and understand the interplay between master policies and unit owner coverage. These specialists can help identify gaps and ensure your coverage complements rather than duplicates the strata’s protection.
Tip #3: Investigate any Red Flags
Red flags that may indicate inadequate coverage include strata councils that haven’t reviewed their insurance in several years, buildings with a history of frequent claims without corresponding risk mitigation efforts, or councils that are secretive about insurance details or deductible amounts.
Recommended Resource: Top Major Red Flags in Condo Documents
How to Easily Analyze This Information
Eli Report provides an AI-powered solution that revolutionizes how strata stakeholders understand and analyze insurance coverage across strata properties. This platform automatically reviews strata and condominium documents, extracting crucial insurance information that helps both unit owners and strata councils make informed decisions.
Easily Extract Important Insurance Information
Insurance Information Extraction allows Eli Report to identify and extract instances of insurance claims and premium increases from strata council meeting minutes. This feature helps stakeholders understand a building’s insurance history and current coverage state, providing valuable context for evaluating both the strata’s master policy effectiveness and potential risks that might affect future premiums.
Understanding Exact Coverages
Understanding Coverage Boundaries becomes clearer through Eli Report’s document analysis, which helps users distinguish between what the strata corporation covers (common property and building structure) and what individual owners must cover (personal belongings and unit improvements). This clarity is essential for avoiding coverage gaps and preventing duplicate insurance purchases.
Get Deductible Information in a Few Clicks
Deductible Information extraction helps identify crucial details about strata insurance deductibles from various strata documents. The platform can also provide special levy forecasts related to insurance costs, helping unit owners budget for potential assessments and understand their financial exposure under the strata’s master policy.
Final Thoughts
Successfully navigating strata insurance requires understanding that protection comes from two complementary policies rather than one comprehensive solution. Your personal unit owner insurance and the strata corporation’s master policy work together to provide complete coverage, but gaps can emerge when you don’t understand where one ends and the other begins.
Remember that the cheapest insurance isn’t always the best value. Focus on coverage adequacy and insurer financial stability rather than premium cost alone. A significant loss poorly covered by an inadequate policy or financially unstable insurer can prove far more expensive than paying slightly higher premiums for comprehensive protection.