How condo insurance works | MoneySense
Does condo insurance cover damage or injury in common areas?
Any damage in the common areas of your building, like the front entrance, party room or pool, is covered by the Homeowners Association (HOA) Insurance which your condominium corporation—and part of your maintenance fees—foots the bill for. “On top of that, [they] will likely have insurance on the building itself,” says Matthew Johnson, customer care manager at Sonnet Insurance.
And it’s not just up to your HOA to decide what kind of insurance it needs. Across the country, each province and territory has a condo act that outlines a condo corporation’s legal insurance responsibilities.
However, there is a major caveat for individuals who own units within the condo. “The condo corporation’s insurance or HOA insurance will not cover you, your personal belongings and liability unless there is damage to the shared elements in the condo, so personal condo insurance is still required,” Johnson adds.
And sometimes, your condo corporation’s policy can’t foot the entire bill when there’s damage or injury as a result of an insured peril. For instance, when someone slips on the glossy marble floors of your boutique building and the condo corporation’s liability coverage comes up short, the condo owners have to pay the difference. They each have to cover a fair share of the remaining payout—and the cost can be eye-watering. Instead of draining your savings or maxing out your credit, special assessment coverage will pay this out for you. The takeaway? Read the fine print and ensure this coverage is included in a condo home insurance policy and if not, it’s worth paying extra to avoid a financial surprise in the future.
Does a condo insurance policy cover water and fire damage?
When it comes to accidental water and fire damage, condo homeowners insurance coverage will take care of the costs. And take special note of the word accidental: that means sudden and unexpected, not something you could have prevented. “Typically, anything that is preventable will be specifically excluded from a policy,” explains Johnson. “Something like mould build-up causing damage to wood/walls would not be covered, as this can be prevented with regular maintenance. Similarly, leakage or seepage would not be covered if the damage occurs over a period of time, like from pipes under the sink.”
Specific to water damage, unexpected burst pipes and leaky appliances are covered in a basic policy while sewer backup or flooding costs are not. The rationale is not everyone will need protection from floodwater or wastewater. If you live on the 20th floor, there’s a low risk of this kind of water damage to your unit. However, if you live in, say, a ground-floor property with a view of a lake, there’s a higher risk. The bottom line: Ask an insurance professional to assess your water damage risk and tailor your policy to meet your needs.
How much coverage do you need?
Essentially, how condo insurance works is as a partnership between your personal policy and your HOA’s policy. “It is important to confirm the coverage that is made mandatory by your condo corporation, as they will want to make sure both parties are protected in the event of a claim,” says Johnson.