Condo insurance special assessment coverage

Condo living comes with numerous benefits, from shared amenities and common areas to the ease of not having to take care of an entire property on your own. That said, while condo owners reap several advantages, special assessments can cause severe financial detriments when unit owners aren't sufficiently prepared for unexpected expenses. This is where special assessment insurance comes into play. To learn more about this coverage, stick around.

What is a condo special assessment?

A special assessment is a type of unexpected assessment condo corporations must conduct to assess costs following a major loss or injury that occurs in the common areas of a condo building. For example, one of the unit owners slips and falls in one of the recreational rooms in the building and then later sues the condominium corporation for damages, or a major storm causes significant property damage to the parking garage that needs repairs.

In either of these scenarios, the condo corporation of your building is responsible for filing a claim under its condo corporation insurance. While a lot of the time this insurance policy will cover repair costs, medical bills, legal costs, and more, sometimes these expenses exceed the coverage limits of the insurance policy.

When this happens, the condominium corporation will then turn to the reserve fund, which is a sum of money used to maintain the building and the surrounding property. This sum of money is typically funded by condo owners through their monthly strata fees.

Now, if a reserve fund is used to pay for the property damage or there is not enough money in the reserve, the condo board may file a special assessment to pay for costs or recover them.

Do condo unit owners have to pay special assessments?

Yes, because condo unit owners own and share responsibility for all common areas and facilities within the condo building, should any major damages occur or liability claims be filed against the condo corporation, they are legally obligated to pay a portion of any major repairs, legal expenses, and additional costs that may be incurred. And, if you refuse to pay for your portion of the special assessment, you could be forced to sell your condo unit.

What does my condo insurance policy cover?

So, what does a standard condo insurance policy cover? When condo unit owners purchase insurance coverage for their units, they can expect to find the following policies:

Liability coverage

Similar to standard home insurance, the first portion of a condo insurance policy is personal liability coverage. In the event that someone is accidentally injured in your unit or experiences property damage and files a lawsuit against you, your liability coverage will cover the cost of medical bills, legal fees, repairs, and replacements up to your coverage limits.

Additional living expenses

Now, let's say your unit is damaged by an insured loss to the extent that it is no longer safe to live in, additional living expenses will cover the cost of accommodations, meals, and other expenses you incur during the time when you are unable to live in your condo.

Dwelling insurance

Dwelling insurance is an insurance policy that covers the cost of repairs to your specific condo unit if it is damaged by a covered peril listed in your policy documents. Common perils include theft, vandalism, severe weather conditions, and some water damage. This condo insurance also covers fire damage to your specific unit.

Personal belongings insurance

Lastly, personal belongings insurance, also known as contents coverage, will cover the cost of repairs or replacements of your personal belongings if they are damaged or stolen from your condo unit.

What is loss assessment coverage?

As you can see, coverage for special assessments conducted by your condominium corporation is not covered by standard condo insurance policies. However, condo owners have the option of purchasing additional coverages like special assessment insurance, which essentially provides financial protection to owners should a special assessment be due.

Note that because this is an additional coverage option, you can expect an insurance premium increase when adding this to your plan. However, if you run an at-home business in your condo, you may qualify for a home insurance tax deduction during tax season, along with expenses for part of your utilities, phone bill, and more. To determine whether you qualify, we recommend speaking with your accountant for specifics related to your business and tax obligations.

How does loss assessment coverage work?

Loss assessment coverage kicks into place to protect unit owners from a variety of situations, including:

1. Injuries that occur in the common areas of your building.
2. Severe weather damage that causes physical structural damage to the exterior of the condo building or common areas.

So, rather than having to pay out of your own pocket for these expenses, your loss assessment coverage will cover you up to a certain coverage limit.

How much loss assessment coverage do I need?

No law states condo unit owners need condo insurance. However, your condo unit is your private property and an investment that you've made. So, why not ensure that you're covered financially, should the unexpected occur?

So, how much coverage do you need? It really depends on your condo corporation's policy, the current state of your building, and how much money the condo association has in the reserve fund. We recommend speaking with your condo corporation directly to determine if any special deductibles apply to some types of hazards.

With this information in mind, we recommend reaching out to an insurance company for assistance. You can also work with a broker who can help guide you through the process of customizing an insurance plan specific to your individual needs and budget.

Does my condo corporation's insurance policy protect me?

Contrary to what you may have been told, your condo association's insurance policy does not protect you as a condo owner. Instead, the insurance plan is specifically designed to cover damages and losses that occur to the building itself and common areas.

How are special assessment costs calculated?

Let's say a special assessment is being conducted for your purchase by your condo association. To calculate how much money each unit owner owes, they'll likely do the following:

1. Get quotes from different contractors or lawyers to determine how much the costs are going to be.
2. Then, depending on how much of a share your specific unit has in the building (which depends on unit size and other factors), the condo corporation will inform you about how much you owe them and when the payment needs to be made.
3. Lastly, if you have optional protection for loss assessments, your insurance company will provide coverage for these costs. If you don't have this insurance policy, you will need to pay out of your own pocket, which could be detrimental to your finances.

How much does condo insurance cost?

Like all types of insurance coverage, the cost for your specific condo insurance policy will depend on numerous factors, including where you live, the current condition of your building, the value of your personal belongings, whether you were to opt-in to additional policies, your previous claims history, your coverage limits, and more.

Therefore, before purchasing a policy, we recommend speaking with an insurance broker or getting multiple quotes on your own from different providers to ensure you're able to get the best deal available.

How BrokerLink can help

At BrokerLink, we help all types of homeowners and renters find affordable insurance coverage, whether you're changing house insurance or purchasing coverage for the first time. With access to multiple policies from some of Canada's top insurance providers, our experienced brokers can help you shop around, compare policies, unlock discounts for bundling home and auto policies, offer home protection tips on fire safety and other certain hazards, answer questions like the difference between home insurance vs. homeowners insurance, and more. If you want to work with a BrokerLink broker for home insurance, we can also help you acquire:

• Tenant and renter's insurance
• Vacation property insurance
• High-value home insurance
• Sewer backup insurance

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