Strata Properties: “To Insure or Not to Insure?” That is the question

fireman saving a burning home

That should never be the question; every strata owner should always insure.

You may be thinking “Why? My strata property already has property insurance!”

That is correct. The strata corporation’s insurance is mandated by statute and paid for by the owners through their monthly strata fees.

Under the BC Strata Property Act (s.149 and s.150), the strata corporation is required to obtain insurance for common property, common assets, buildings as shown on the filed strata plan and fixtures built or installed on a strata lot.  This property insurance must include full replacement coverage and cover all major perils.  The Strata Corporation must also carry insurance against liability for property damage and bodily injury.  In addition, the Act requires the Strata Corporation to assess the adequacy of its insurance every year –so it’s generally adequate coverage.

However, the insurance provided by the strata corporation DOES NOT COVER your contents, improvements and betterments, deductible assessment, additional living expenses and personal liability (or loss of income, if you are renting out the unit).

Of particular importance is the “deductible assessment coverage.”

As with most insurance, strata insurance policies contain a deductible (which means that the strata corporation picks up the tab for any insurance claim up to the deductible amount). Generally, the more units in the strata complex, the bigger the deductible (as it’s usually paid for by all of the owners as a common expense under s.158 (1) of the Strata Property Act).

However if the claim (i.e. water damage or fire) can be attributed to a particular owner, then he or she will likely be liable to pay the WHOLE deductible for the strata complex under s.158(2) of the Strata Property Act. In some cases, particularly where there have been previous claims, the deductible in a large strata complex can be upwards of $40,000. That is a huge expense to be borne by a single owner.

Insurance deductible

158   (1)Subject to the regulations, the payment of an insurance deductible in respect of a claim on the strata corporation’s insurance is a common expense to be contributed to by means of strata fees calculated in accordance with section 99 (2) or 100 (1).

(2)Subsection (1) does not limit the capacity of the strata corporation to sue an owner in order to recover the deductible portion of an insurance claim if the owner is responsible for the loss or damage that gave rise to the claim.

So how do you protect yourself from such a huge loss?  By adding in the Deductible Assessment Coverage in your own “owner’s policy.”

Furthermore, it’s advisable to obtain “Unit Additional Protection Coverage” for damage to common property which falls short of the strata corporation’s deductible (and thus, the strata’s insurance is not triggered, but you may still be liable to pay for it, if you caused it).

In either of the above scenarios, if you have coverage through your own “owner’s policy,” you will pay your own deductible and your insurer will cover the strata corporation’s deductible (or the lower amount if the claim is under the deductible limit).

Be sure to ask your insurance agent about these options when you place your owner’s policy, as these coverages are NOT automatically included in your policy.

Unfortunately, this kind of loss happens to someone every year!

A few years ago, an 85 year old client of mine with early stage Alzheimer’s disease was in the process of moving into a nursing home, when he inadvertently flooded his townhouse and several adjoining properties a week before the closing date.  He was tagged with a $25,000 building insurance deductible –which we were forced to pay out of the sale proceeds.  The strata corporation was not inclined to give him a break despite his age and medical condition.

Being aware of these issues may save you from a similar fate!

© 2019 Pazder Law Corporation

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1460 – 800 W. Pender St, Vancouver, BC, V6C 2V6, Tel: 604-682-1509.

Ask for Kenneth Pazder or Melissa Valana if you have questions.

DISCLAIMER: The foregoing is not legal or insurance advice. It is presented for information purposes only. Statutes and case law may change over time, so it is always best to obtain professional advice when making a decision of consequence, such as insuring your strata unit. All major insurance agencies offer “owner’s policies” for strata purchasers” with various options such as those mentioned above.