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Congratulations on the purchase of your first condo! However, before thinking about furnishing the living room or what colour to paint the walls, you need to get insurance. Be careful, though: you’ll be taking out two policies. The first is individual and the second, collective. Here is how they complement each other in protecting your home.
Just like when you were a tenant, you need individual insurance to cover your possessions and your civil liability. But now that you own a condo, you and the building’s other condo owners are also required to have adequate collective insurance for the building and its common areas.
Let’s look at each of these two types of insurance:
Your “individual” condo insurance
Although individual condo insurance is not mandatory, it would be very unwise to do without it. For a start, this insurance covers your personal possessions, since you naturally don’t want to go through the nightmare of a fire that destroys all your belongings and then have to purchase everything again out of your own pocket because you’re not insured.
Your individual condo insurance also covers any post-purchase improvements made to your unit: everything in your unit that is different from your building’s “reference unit” is covered by this type of insurance. What is the “reference unit?” As explained by the Insurance Bureau of Canada, effective since December 2018, all condo corporations in Quebec are required to have “a description of the private portions of a reference unit.” You should use this description as a guide to identify and insure the improved portions of your condo. For example, you might have made renovations or major changes to your unit or simply replaced the shower with a fancier design. If so, you’ll need to inform your home insurance broker about all such changes.
Your individual insurance also covers your civil liability, which protects you in the event that you involuntarily damage any of the other units or even parts of your own unit that belong to the building, such as the floors.
Your individual condo insurance also includes the “distribution.” The distribution is the amount your condo corporation charges all co-owners of the building based on what the corporation has to pay for repairs to the building as well as for the deductible on the corporation’s insurance policy for the building itself and its common areas. This amount is prorated among all the building’s condo owners. Your individual condo insurance therefore covers your share of the common perils that are not covered by the corporation’s insurance policy.
Your shared “collective” insurance with the other condo owners
Many condo owners ignore the importance of their condo corporation, even though it’s the only legal entity governed by the Civil Code of Quebec to represent all of a condominium building’s co-owners. The condominium corporation is responsible for preserving and maintaining the building, managing its common areas, and upholding the co-owners’ collective interests.
Nonetheless, according to a survey (only in French) conducted in 2015, 25% of condo owners don’t know who’s responsible for maintaining and repairing their building, 50% are ignorant of the protections included in their condo corporation’s insurance policy, and 33% have never read their declaration of co-ownership, which sets out their responsibilities and those of the corporation.
The insurance you take out collectively with the other condo owners normally covers standard perils up to an amount corresponding to the total value of the building, except for improvements. Since this is a legal obligation, you should carefully check whether your corporation is legally compliant! Do not let any irresponsible co-owner persuade your corporation to take out insurance for an insufficient amount.
The corporation’s insurance covers the building itself, including common areas, like the lobbies, corridors, stairs, elevators and the roof, as well as the furniture in the common areas.
This insurance also covers the portions of your unit that are considered part of the building, such as the walls, floors and windows. Everything in your unit that corresponds to the reference unit description is also covered.
Lastly, the corporation’s insurance also covers partial civil liability for damage to the building that did not originate from any of the units. (In the event that damage to the building comes from your unit, this should be covered by your individual insurance policy.)
These two types of insurance are therefore totally complementary and together they provide you with complete coverage.
Still unsure? It’s only normal that you still have a few questions, especially since condo owner insurance is somewhat complicated and there are invariably special cases! Your insurance broker is always just a phone call away to answer your questions and guide you in choosing the insurance that best matches your needs.