Condo 101: Understanding Condominium Insurance
When unforeseen events cause injuries or damage on community grounds, the best way to protect homeowners is to have well-rounded and comprehensive insurance coverage. However, insurance needs vary from one community to the next. Finding the right condominium insurance policy for your corporation will depend on several factors, including your corporation’s type, size, amenities, and services offered.
What Is Condominium Insurance?
Like other types of insurance policies, condominium insurance serves as a safety net should something go wrong on community property. The purpose of corporation insurance coverage, which is also referred to as the “master policy,” is to protect community members from liability if there’s an accident, injury, or damage in shared spaces.
Your corporation’s governing documents should have details on condominium insurance requirements, including the “All Risk Policy” for the condominium. However, it’s essential to consider the needs of your community when looking for the appropriate insurance coverage.
What Does Condominium Insurance Cover?
Condominium insurance will generally cover property damage and liability expenses, ensuring homeowners don’t need to cover these costs themselves.
Property damage. Corporation insurance provides coverage for expenses related to unit damage as per the governing documents, structural damage in common areas, including repairs after an accident, fire, or vandalism. Still, some policies don’t cover damage caused by natural disasters or seasonal weather. You may need to add that coverage separately to confirm your corporation is protected from those costs.
General liability. Corporation insurance also covers liability expenses for the condominium. If someone has an accident or is injured in shared community areas, corporation insurance may cover the cost of legal defense, settlements, and other expenses.
Corporation insurance only extends to common community areas and doesn’t cover a homeowner’s personal property or betterments they have made to their unit. If residents want financial protection for their home or condo and their belongings, they must purchase home insurance, or condo insurance, individually.
5 FAQs from Condominium Communities
While it’s the board’s responsibility to find the best insurance coverage for their community, it can feel overwhelming if you don’t know what you need. To help, here are answers to five commonly asked questions about condominium insurance.
- Is our condominium board covered under our liability policy?
There’s specific liability insurance for board members called Directors and Officers (D&O) coverage. D&O coverage protects board members from being personally sued for alleged or actual wrongful acts in running the condominium. Board directors can be sued for several reasons related to their roles. Some of the reasons, or wrongful acts, include:
- Failure to follow bylaws
- Discrimination
- Libel/slander
- Breach of contract
In the case of injury, your liability policy will likely offer limited coverage in the event a board member is injured—regardless of who was at fault. However, your liability policy should provide full coverage for an injured board member if the condominium’s negligence led to the injury.
- Should our corporation carry crime coverage?
Yes, crime coverage is something every condominium board should consider. Crime coverage shields condominium funds from situations like:
- Cheque fraud
- Wire fraud
- Embezzlement
- False invoices
- Computer fraud
Although your management company will have its own crime and fidelity insurance policy, it will not cover fraudulent activity outside of the company’s system. Having your own condominium crime coverage adds an extra layer of protection.
- Does our condominium insurance cover sporting events and other athletic competitions?
Most condominium general liability policies don’t cover organized sporting events or competitions held on community grounds. If your condominium plans on hosting or sponsoring sporting events that allow non-members to enter the community to participate or compete on the premises, your condominium policy will most likely not apply to any injuries. Examples include:
- Tennis tournaments
- Soccer games or scrimmages
- Swim meets
- Pickleball tournaments
- Any other planned sporting event
Nonetheless, condominium insurance does cover condominium corporation members who are using community amenities for their own use in the facility’s intended way. Consult your condominium lawyer or insurance agent for more details on what your policy covers.
- How do we determine our community’s total replacement cost?
Replacement cost value is the amount of money needed to repair or replace community structures at today’s prices of building supplies. You should work with a licensed third-party appraisal professional to get your corporation’s accurate total replacement cost. While real estate appraisals and reserve studies may offer some insight into your community’s replacement cost values, they aren’t intended to replace a comprehensive insurance appraisal.
Qualified appraisal firms use dedicated technology and software to calculate a corporation’s total replacement cost value. The results are usually guaranteed for several years, making the initial cost worth the investment.
- Why does my condominium need workplace insurance coverage?
Workplace Insurance coverage is a benefit that pays for the medical care of employees who are injured or become ill from their workplace. If your corporation doesn’t directly employ workers, you might assume you don’t need coverage. But, failing to invest in workplace insurance can cost you if you hire a contractor who is uninsured or has lapsed insurance.
Even if a contractor presents a certificate of insurance, they may not have active coverage at the time. If one of the contractor’s employees is hurt while working on corporation property, the condominium could be held liable for damages if you don’t have a workplace insurance policy. Your condominium insurance agent can share affordable pricing and how you can add it to your current coverage.