Condo owners face growing insurance bills for damage to common areas

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Many condo buildings are increasing their deductibles, which helps reduce the annual cost of insurance, but the cost of a higher deductible is passed to condo owners when a building submits a claim for damages.Darryl Dyke/The Canadian Press

Condo unit owners across Canada Common areas may be on the hook to pay costly damages for construction as condo boards attempt to limit the cost of insurance premiums by increasing the deductible on policies – from the current $10,000 to $150,000 in some cases. increase.

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Industry experts state that partial costs for damage to common spaces caused by a condo owner’s unit, such as a leaking washing machine flooding a hallway, are usually passed on by the condo corporation to the responsible unit holder. , which is required to pay deductible – The insured portion of the loss.

“This is a disaster waiting to happen because there has been little communication from condo boards when they increase their deductibles, putting many condo owners at risk of paying thousands of dollars out of pocket,” said Sabine Ghali, director Said Buttonwood Property Management Inc. in Toronto.

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Condo corporations – also known as level corporations in some provinces – are legally required to purchase insurance policies. To cover the damage caused to the common areas of their buildings. Like insurance policies for individuals, these contracts have a deductible, which is not covered and must be paid out-of-pocket by the condo corporation if it claims.

No easy solution to the complex problem of high condo insurance premiums, says BC report

Many condo corporations are run by a group of individual condo owners who are also in charge of trying to keep monthly condo fees from rising. But this has become increasingly difficult as insurers increasingly increase premiums — sometimes doubling them or more — as the cost of claims rises.

To reduce the higher premiums, many buildings are opting to increase their deductibles, which helps reduce the annual cost of insurance. cost of a The higher deductible is then passed on to condo owners when someone submits a claim for building damages — a practice known as chargebacks.

For example, if a kitchen fire in a condo unit damages the elevator, the owner of the unit will be responsible for paying Full deductible of building.

Most unit owners have insurance policies that cover deductibles withheld by condo corporations, but only for a “more traditional” maximum amount of $10,000, said Ms. Alley, who lives in condos in the Greater Toronto Area. Manage buildings.

He said the number of buildings that can be cut down has accelerated over the past year, with many condo boards only reporting changes in annual updates that are usually mailed in newsletters.

Ms Ghali said the increase in the deductible limit should not be communicated in a format that “could get lost in the shuffle.” Condo boards need to do a better job of educating condo owners on building and unit insurance policies — specifically how much chargeback coverage unit owners have. currently and which insurance companies will cover a new higher amount.

“Some insurance companies have a cap on what deductibles will cover, which means condo owners may be left scrambling to find a new policy entirely,” Ms. Ghali said.

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

“The industry has seen an increase in the cost of claims in all kinds of different areas – not only in property claims but also in liability claims,” Mr. de Pruis said. “In British Columbia we have seen severe weather, along with macroeconomic factors such as low interest rates, drive up the cost of insurance premiums.”

“And, similar to your car insurance, one way to help reduce insurance premiums is to increase your deductible.”

Mr. de Pruis said shifting the rising cost of premiums from a corporation to an individual entity holder is not addressing the root cause of the price increase, which is the rising cost of claims.

In the summer of 2020, the IBC established a National Commercial Insurance Task Force to conduct roundtable meetings to address the many consumer concerns about the affordability of commercial insurance, particularly in British Columbia and Alberta. including the insurance market.

The IBC published a number of recommendations to the industry, including a proposal to regulate building maintenance and make it more efficient (to reduce the number of claims), encourage condo corporations to improve their risk profile and provide better premiums. Educate about what you qualify for, and the amount a condo corporation can apply to unit owners on its deductible amount.

Alberta recently made changes to allow condo corporations to claim a deductible maximum of $50,000 from an entity holder.

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