June 16, 2020

You may have seen in the news that the BC Financial Services Authority is concerned about the costs and availability of strata insurance. For some time now, BC strata corporations have been facing substantial increases to their insurance rates and deductibles, with many seeing significant premium increases on renewals.

Although most of the rising deductibles reported in the news are mainly being imposed on high-rises and higher risk buildings (those with a history of claims), many buildings of all sizes, and in all communities, are seeing the impact of growing insurance costs for strata corporations. Here’s what to know to protect yourself.

What is strata insurance?

Strata corporations have their own insurance policy for the building and/or for common areas. This is sometimes called strata insurance or building insurance. The deductible for their policy can range from $5,000 to $500,000 or more. In the case of a claim, this type of policy (depending on the bylaws) could result in the strata assigning (or "assessing") this deductible to all units, a group of units, or just one. This means you could be financially responsible for paying your strata’s deductible.

This is not to be confused with condo insurance, which is purchased by the owner of a condo unit. Condo insurance usually provides coverage for your unit, your belongings, liability, and assessments from your strata.

What’s changing?

Condos are prone to frequent and expensive water-related claims. This, coupled with anticipated climate-related disasters and expensive construction, labour, and materials, means the cost insuring strata corporation buildings is rising 50%-300%. As a result, some strata insurers are discontinuing coverage and the remaining insurers are having to charge higher premiums and/or deductibles.

How does this affect me?

There’s two ways this could affect you. The first is your strata fees. If your strata corporation’s insurance premium is increasing, they may increase your monthly strata fees or issue a one-time levy to cover the difference.

The second is in the event of a claim. Based on your building’s bylaws, if there’s damage to the condo building and/or common areas and you’re determined to be responsible for the damage, then you would be financially responsible for paying your strata’s insurance deductible.

What should I do?

1. Make sure you’re protected.

First and foremost, it’s essential to have your own condo insurance whether you’re living in the condo yourself or renting it out to tenants. Condo insurance provides coverage for assessments of your portion of your strata corporation’s insurance deductible when a claim is made. BCAA Condo Insurance automatically includes $25,000 coverage for strata insurance deductibles, with up to $100,000 coverage available for purchase. It also includes protection for strata property damage coverage.

2. Familiarize yourself with your strata’s insurance policy.

• Request a copy of your strata corporation bylaws to understand what liabilities, including repair and maintenance obligations, fall on you as a unit owner. Check who can be held financially responsible (negligent or not) if the cause of damage originates in your unit.
• Obtain a copy of your strata corporation’s building insurance policy every year. This policy should be provided at your strata corporation’s annual general meeting or you can contact your property manager for a copy. Note the strata building’s deductibles, including those for earthquake and water damage, and check them each year for any increases.

3. Ensure you have adequate coverage.

• Take an inventory of your belongings in your unit and storage locker, including any significant upgrades such as new flooring or kitchen cabinets so you know how much coverage you’ll need.
• Review your condo insurance policy against your strata corporation’s policy to see if there are any gaps, which includes checking that you have sufficient coverage to protect you from a high strata deductible.

4. Always renew your insurance on time so that you’re covered.

If you need more strata insurance deductible coverage or have any other questions, please contact BCAA, your BC-based insurance experts (1.888.268.2222). We'd be happy to help.